CARS: The Real Cost – PART 5 : Insurance/Taxes

The lifetime cost to insure and pay taxes on cars will surprise you – because they are STAGGERING These payments can’t be avoided, but it’s a cost to stare down when buying a car, and will serve as an argument to simmer down the flow of money.

As our last few articles have pointed out, the opportunity cost in buying different kinds of cars can SKYROCKET over a lifetime.  A few thousand spent now, translates to tens of thousands of dollars down the road…This six-article series will make it crystal clear that making different car-buying decisions can revolutionize your early retirement possibilities. 

Okay, let’s deal with the nasty truth about car taxes, insurance, and simple registration over a lifetime…

TOTAL LIFETIME OPPORTUNITY COSTS to pay INSURANCE, TAXES, & LICENSING:

CAR TYPE #1 — cars valued at $4,000 with liability insurance (5 cars bought over a lifetime):
Cost to insure, tax and register: $98,400

CAR TYPE #2 —  cars valued at $25,000 with :
Cost to insure, tax and register: $343,200

That’s a $244,800 more being paid to support a $25,000 car versus a $4,000 car: clearly

Okay, we started at the end: if you want to see how we worked out those number, keep reading:

COSTS OF INSURANCE, INSPECTIONS & LICENSING ——

Liability insurance

$30/month =  $360/year = $3,600/decade = $28,800/ 80 years
x2 opportunity costs = $57,600

Full coverage insurance

$70/month =  $840/year = $8,400/decade = $67,200/ 80 years
x2 opportunity costs = $134,400 

Just by driving a car that needs full coverage insurance, you are paying an extra $76,800 in a lifetime (very conservative estimate!)

For some people that equates to 2 years of working life

PROPERTY TAXES  ———————-

Property Tax

Car property tax varies by state,
but we’ll use a conservative 5% yearly tax

Car valued at $4,000 = $200/ year
Over 80 years that’s $16,000

Car valued at $17,000 = $850/ year
Over 80 years that’s $68,000

With x2 opportunity costs that’s $104,000 more paid in a lifetime than for cars valued at four thousand dollars!

Car valued at $25,000 = $1250/ year
Over 80 years that’s $100,000

With x2 opportunity costs that’s $184,000 more paid in a lifetime than for cars valued $4,000!

SALES TAX ———————-

When you purchase a car, sales tax usually applies  (You can find a DMV online tax calculator for cars, such as this one: http://www.dmv.org/buy-sell/tax-and-tags-calculator.php)

In my area, (St. Louis, Missouri) these are the sales taxes you will pay:

Car price $4,000
sales tax $318 x 5 cars in a lifetime = $1,590
x2 opportunity costs = $3,180

Car price $17,000
sales tax $1,350 x 5 cars in a lifetime = $6,750
x2 opportunity costs = $13,500

Car price $25,000
sales tax $2,000 x 5 cars in a lifetime = $10,000
x2 opportunity costs = $20,000

Inspections / License Plate renewal   ——–

$30 per inspection x 80 years = $2,400

$30 to renew license plate stickers x 80 years = $2,400

For both fees, in a lifetime
you are paying around $4800

Last Words ——–

So, by combining all the numbers through this article, we came up with the final conclusion that buying 5 different $4,000 cars over a lifetime, versus buying 5 different $25,000 cars will translate to paying $244,800 more just for INSURANCE, TAXES, AND REGISTRATION.

The next car-cost article will finish up the series: there we’ll tally up ALL car related costs.  It will be life changing.  This will give us absolute clarity of the difference between making modest car purchases, and the extreme cost of ratcheting up our taste in cars even just a little

All of this may be heartbreaking, but this serves as an outstanding and bizarre example of how easily Americans are duped (or self-duped) into DECADES of work, paying obscene costs that seem small, but grow to enormous financial burdens over a lifetime!!!

NEXT >>CARS: The Real Cost – PART 6 : FINAL – TOTAL COSTS
PREVIOUS >>CARS: The Real Cost – PART 4 : Repair/Maintenance
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