How much does your car cost? It’s not as simple of a question as one might think. As I wrote previously, my car was in for repairs and it gave me a chance to reflect on the costs of car ownership. It all started when I contemplated trading in my beautiful 1994 Volvo 850 wagon for a new car. How much would that new car cost me?

Here’s my breakdown of what a car really costs. It made me change my mind for a while on getting that new ride:

1. Gasoline/fuel. This is a big one these days. The shop let me use a free loaner car (I was excited until I found out it was a 1998 minivan) as the parts took a few days to come in. I drive about 40 miles one way to work (I’m not exagerating) so I ended up putting 80 miles plus a few extra for errands on the loaner. Part of the deal was to pay for the gas I used and then it really hit me at the pump. I used just under 5 gallons of gas in a day, which was bad enough, then I realized it was $20 to pay for a day’s worth of gas! If I drive to work (I’ll get to that later) It will be $100 per week.
2. Repairs. It was $330 to fix my air conditioning this time. I’ve also needed $1000 to fix other problems this year, so I’m right around $1300 dollars in 6 months for repairs. That sounds painful, but I considered the other option — of owning a new car under warranty, and my payments end up lower than all but the cheapest vehicles.
3. Maintenance. I separated this from “repairs” because it is something that both new and used car owners have to think about. Oil changes aren’t too bad, but keeping up with the regularly scheduled maintenance as outlined in the owners manual can start to really add up, especially at the higher millages — 30,000 miles or more.
4. Payments/Down payment. I don’t have payments on my commute car, but a reasonable car looks to be around $300 a month — if I take a long term loan. “Nice” cars cost hundreds more and then there’s the matter of handing over a down payment, if only for taxes/tax/title.
5. Insurance. Insurance on my paid for car is low. Insurance on new cars is high. I’ve known a couple of people who only considered monthly payments for their cars then were in for a shock when the insurance bill came due.
6. Taxes/Tags. I live where there is this pesky thing called “ad-valorem” tax. In short, the more your car costs, the more your taxes are. A friend of mine complained about his $600 dollar tag fee one year. I paused for a minute and then asked him what kind of car he had. “A brand new Audi,” he replied, obviously not doing the math. I don’t think the ad valorem tax is used everywhere, but here, if you want to play, you’ve got to pay.

So as you might have guessed, I held off a little longer on that new car. With the new repairs, i think I can get another year or two out of the 850. By then I’ll have enough to go after a new car or maybe another used one purchased outright again.

In the mean time, I’m fortunate enough to be involved in a $50/month commute program that gets me a ride to and from work each day. In three days a month it pays for itself and keeps miles off my already fragile car. That’s certainly worth looking into if you have a long commute.

What other car costs have you found? Let me know in the comments below:

As part of my renewed interest in finance, I’ve had to look over my full lineup, including insurance.  I’m starting with life insurance, because I have a young family that I’m supporting.  If something should happen, they’ll need a sizeable amount to move ahead in their lives.

I’ve had the same insurance for years now, so I had to do some research on the subject, and here’s what I’ve found:

• How Much Coverage? – This is the age old question and what initially drew me to look at my life insurance.  I’ve looked around to see what the experts say.  On the radio, Clark Howard recommends 6 times your annual salary, and Dave Ramsey recommends 8 to 10 times your annual salary.  Guess what?  I have less than both of those amounts.  I need up get more coverage, but what kind?
• Term vs. Whole Life? – Here’s something every expert I’ve heard of has agreed on.  Term beats whole life almost every time.  Whole life policies build up cash value as you go.  Term only pays out if you pass on.  So why would term be better?  It costs more per dollar of payout, and the extra money you pay would grow faster if you just invested it yourself.
• Mortgage Insurance? – You can get life insurance that pays your mortgage should you pass on.  I’ve heard recommendations against this.  Why?  It’s effectively insurance for the bank.  If you pass on, your beneficiary can get the cash from a term plan, then decide if they want to pay off the house, or sell it.  I’ve also heard that mortgage insurance doesn’t have the same bang for the buck.
• Work vs. Independent? – I’d always thought that getting my insurance through my work was the cheapest option.  Turns out it might not be.  Clark Howard reports that the rates might be higher through an employer.
• How Long? – If I do get term, how long should I get it for?  Turns out that going for the long term is best.  Ramsey’s theory is to get a 20 year term.  Over those two decades (the plan goes) you will have built up enough savings to be “self insured”.  Sounds like a good plan.
• What Company? – There’s plenty of companies out there looking to insure people, but who’s going to be around in 20 years, if, heaven forbid, I should actually need that policy?  Clark Howard recommends looking for a company rated A+ or better (how do you get better than an A+?).

That’s what I’ve found so far, and I’ve resolved to get 20-year term life with a good company at at least 6 times my current salary.  As with everything, your results may vary, and you’ll have to make your own decisions based on your situation, but I hope these tips help.  May we all live long enough to never need the insurance we buy!