- BIST10011,722-2.89%
- USD49.45+0.05%
- EUR55.62+0.37%
- GOLD4,181.10+0.26%
- INTEREST37.00%-1.00
- BITCOIN81,465+0.10%
- October 18, 20268°
- BIST10011,722-2.89%
- USD49.45+0.05%
- EUR55.62+0.37%
- GOLD4,181.10+0.26%
- INTEREST37.00%-1.00
- BITCOIN81,465+0.10%
- October 18, 20268°
Hidden costs of buying a new car: Extras add up to 60% of price over 5 years
A car’s total cost of ownership far exceeds the purchase price. In the first five years, depreciation, fuel, insurance, maintenance and tire costs can drive the total 40 to 60 percent above the purchase price.
Focusing only on the sticker price when buying a new car can lead to big budget surprises. The true cost of vehicle ownership consists of a series of additional expenses that start at the moment of purchase and continue for five years.
The Biggest Expense: Depreciation
A new car loses 15 to 20 percent of its value the moment it leaves the showroom. According to experts, this decline in the car's market value accounts for 40 to 50 percent of the total cost of ownership over the first five years. In subsequent years, an average annual depreciation of 10 to 15 percent continues. By the end of the fifth year, most vehicles have lost 50 to 60 percent of their purchase price. For example, a car bought for $30,000 can only be sold for between $13,500 and $15,000 after five years.
Ongoing Costs: Insurance and Fuel
Comprehensive and mandatory traffic insurance are another significant expense item in car ownership. The annual premium for comprehensive insurance ranges between 3 and 5 percent of the car's current value. Total insurance premiums paid over five years can reach 15 to 20 percent of the car's initial purchase price. Insurance costs are shaped by factors such as the car model, the driver's age and traffic history.
For petrol or diesel cars, fuel expenses account for 20 to 25 percent of the total cost over five years. A driver covering an average of 15,000 to 20,000 kilometers per year spends more than a fifth of the car's purchase price on fuel over five years. Electric vehicles can reduce fuel costs by 40 to 50 percent when charged at home, but in some markets their resale value may depreciate faster.
Maintenance, Repairs and Tires
While periodic maintenance and breakdowns are generally covered by the manufacturer during the warranty period, consumables can be costly. Once the warranty expires, replacing mechanical parts such as brake pads, discs and the suspension system increases expenses. Maintenance and repairs account for between 7 and 10 percent of the total five-year cost of ownership.
Tires, on the other hand, are an expense most buyers overlook, yet critical for safety. A set of tires lasts between 40,000 and 60,000 kilometers depending on climate conditions. That translates to 2-3 years under normal use and requires at least two tire changes within five years. Tire costs add an extra burden of $600 to $2,500 depending on the vehicle type and rim size.
What Do Experts Recommend?
Engineer Jihad Mohammed al-Bashir, manager of a large service center in Qatar, stresses the need to focus on total cost of ownership when buying a car. Al-Bashir recommends choosing models with high resale value and a reliability track record.
He also notes that buying a one-year-old used car in good condition is a smart strategy to avoid the steep depreciation of up to 20 percent in the first year. Comparing insurance quotes before purchase and reviewing them annually, as well as choosing vehicles with only the features you need, also yield savings.
The expert adds that keeping the car for as long as possible reduces costs, and that the first five years are the most efficient period in terms of total cost.
In conclusion, a car's purchase price is just the tip of the iceberg. While depreciation and fuel costs account for more than 70 percent of the total cost, for a savvy buyer the most important criterion is not the lowest purchase price but the lowest long-term total cost of ownership.
Stay Updated with Ally Daily
Subscribe to be informed about special news, developments and announcements. We will keep you informed.
By signing up, you agree to our Privacy Policy
