Fixed and Variable Vehicle Costs
Vehicle costs are the necessary costs of owning and operating a vehicle. These costs can be separated into fixed and variable vehicle costs. Both costs are essential parts of having a vehicle. So, it is important to understand what both fixed and variable expenses for cars are so you can better plan for them in your vehicle budget.
What Are Fixed Costs?
The fixed costs of owning and operating your vehicle are any of the costs of owning or operating the vehicle that remain basically unchanged from month to month, no matter how much you use your vehicle. For managers or business owners, these are known as indirect costs. These costs may change over time, but generally not in the short term. For instance, license and registration fees will likely increase, but this generally happens slowly over time. This makes these costs easier to plan for but not easy to decrease quickly when you need to lower your expenses.
For instance, if you lease your car, you may be able to choose a car with a cheaper payment when your lease ends, but your current car payment is likely going to remain the same until the end of the lease. Here are a few common examples of fixed vehicle expenses.
- Loan payments
- Property tax
- License and registration fees
What Are Variable Costs?
Variable vehicle costs are the costs associated with your vehicle that will change based on how much you operate your vehicle. Because of this, variable costs are direct costs, and they can increase quickly and significantly depending on how much you use your car. However, other factors can affect these costs as well.
For example, if you drive your car a lot, fuel costs will increase, which means fuel is a variable expense. But your fuel costs will go up if the price of fuel goes up, as well, even if your vehicle usage remains the same. So, to determine if the cost is a variable cost, you should look to see if the cost is actually increasing due to increased use of your vehicle.
There are several other variable vehicle costs, and we will list a few of these below.
All of the costs listed above are likely to increase the more you drive. Basically, this is what makes variable costs different from fixed costs. Variables costs increase as you drive more, whereas fixed costs do not change when you use your vehicle more.
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