The Lowdown on Vehicle Ownership Costs

Here at The Faricy Boys, we’d like to tell you that figuring out what you’ll pay for a vehicle and what it will cost overall is simple. It would be great if you could look at a price tag, see the price, pay that price, and call it a day. We would love for that to be the case, but as with all things in life, reality gets a bit complicated – particularly due to taxes and fees that come with vehicle ownership. If you’re interested in figuring out what kind of car has the lowest vehicle ownership costs in Colorado, then be ready to do a little work that will pay off in the long run.
There are two major things to consider when it comes to figuring out vehicle ownership costs in Colorado: initial expense, and long-term costs. These are really the same things you need to think about when making any kind of purchase, but since vehicles tend to cost more than something like a phone (though pretty soon we’re going to need a loan to buy the latest phone!), these expenses are much more important. Let’s take a look at these two issues in detail so you can see exactly what each one entails and plan out the choice that will give you the lowest vehicle ownership costs in Colorado.

Initial Expense – Sticker Price

The good news is that we’re going to start with the simplest part of this equation. When figuring out the lowest vehicle ownership costs in Colorado, it all starts with the sticker price of any given vehicle. This will vary from one dealership to another, can often be reduced due to big sales or rebates available, and represents your basic, initial cost for the vehicle. If you have a trade-in, then you can reduce the effective price of a vehicle by its value.

Initial Expense – Sales Tax

Here’s where things start to get a bit complicated when looking for a vehicle with low ownership costs. There is sales tax on the purchase of a new or used car, just like anything else you buy, and the total tax depends on where you buy it. The state sales tax here in Colorado on a vehicle is currently 2.9%. There is also an El Paso County tax of 1.23%, as well as Colorado Springs sales tax of 3.12% and Pikes Peak Rural Transportation Authority tax of 1.0%. All together, that means you are looking at 8.25% sales tax on a vehicle.
The good news is that sales tax is only applied to what you actually pay, in total, for a vehicle. So if you’re looking at a $15,000 Jeep, but you have a $5,000 trade-in, then you only pay sales tax on the $10,000 that you actually pay. That’s one big way a trade-in helps your wallet.

Initial Expense – Title Fee

You will also need to pay a title fee when you first purchase a vehicle. There’s good news here too: it’s only $7.20. Yep, that’s it. You’ll need to pay a little more for each printed page for your title, but it’s nothing compared to some of the other taxes, fees, and expenses that come with vehicle ownership.

Long-Term Costs – Ownership Tax

Now comes the tough part, the expenses you need to consider when looking for lowest vehicle ownership costs that are not up-front. Ownership tax is a personal property tax here in Colorado that you need to pay when you register your vehicle, and each year after. The age of the vehicle has a huge impact on how much you pay in ownership tax, so if you choose a used model, then you might pay a lot less. This tax is based on the “Taxable Value” of the vehicle, which is determined by Colorado as 85% of the MSRP – regardless of what you actually paid.
For the first year, the ownership tax in Colorado is 2.1%, and it goes down each year after – remember this is based on the year the vehicle has been in service, so it’s 2.1% for a brand new vehicle from this year. The second year in service, this tax goes down to 1.5%, then 1.2% the year after, and 0.9% the fourth year of service. From years five through nine the tax is just 0.45%, and from the 10th year on it is only $3.00 rather than a percentage of the Taxable Value.

Long-Term Costs – License Fee (Registration)

The License Fee is often referred to in general as “registration,” though registration fees include the Ownership Tax, License Fee, and other fees. When you’re figuring out the lowest vehicle ownership costs in Colorado, just remember that the license fee is based on the vehicle type and weight. The less a vehicle weighs, the lower the license fee – so big, heavy-duty pickups cost more to license than a compact sedan.

Long-Term Costs – Insurance

When you’re looking at long-term expenses and low vehicle ownership costs, it’s important to keep insurance for your vehicle in mind. Insurance rates can vary significantly from one provider to another, based on overall coverage terms, and from one vehicle to another. A flashy sports car is pretty much always going to cost more to insure than a more practical vehicle (though the sports car is probably more fun to drive).

Long-Term Costs – Fuel

This is easy to overlook, but over the next five years or so, the cost you pay at the pump will certainly add up. Consider how much you drive and how much you’ll need to refill. It might be worth it to spend a little more now on a vehicle with better gas mileage, to save yourself money in the long run at the gas station. Plus, remember that what you pay now is something you can plan on, while gas prices often vary and are unpredictable.

Long-Term Costs – Maintenance and Repairs

You also need to consider how much you will spend over the next few years keeping your vehicle in good condition. Basic maintenance and service shouldn’t be a huge expense, but it’s worth keeping in mind. Repair costs will depend on if you end up in a collision or other accident, as well as the reliability of the vehicle.

Long-Term Costs – Financing

You also need to think about what you pay for financing on a vehicle when looking for the lowest vehicle ownership costs in Colorado. Interest that you pay on a car loan is a long-term expense that you need to plan for when budgeting for your vehicle purchase. The more you can pay as a down-payment, the less interest you pay over the course of your loan.

Long-Term Costs – Depreciation

Finally, think about how much value the vehicle will lose simply by being owned and driven in a regular manner. You can look at resources like Kelly Blue Book, and their excellent “5-Year Cost to Own” tool to get an estimate for depreciation and other long-term costs. For example, the 2018 Jeep Wrangler Unlimited Sport is ranked #1 for the lowest 5-year vehicle ownership costs among mid-size SUVs. That makes it one of the best overall values on the road, saving you money over the long-run while you own and enjoy it.

The Big Picture

All of this can seem like a lot to think about and figure out, but it’s worth taking a little extra time to plan out your budget and expenses for the next few years. This way, you can figure out what represents the lowest vehicle ownership costs in Colorado for you and your family. Here at The Faricy Boys, our financing experts and friendly salespeople are happy to answer all of your questions about initial and long-term costs. We will work with you at our Colorado Springs dealership to make sure you find a vehicle that fits your needs – both personal and financial.