Anyone who owns a horse will probably tell you that the initial cost of the average riding horse is really only the tip of the iceberg. Keeping a horse is becoming a luxury. But how much does the 'average' horse cost? What's the difference between a free horse, a $500 horse, a $5000 horse and one that can cost well over the ten or twenty thousand dollar mark?
There are a number of factors that affect the cost of horses, and these don't really affect the $10,000 + horses. Those horses are being bought and sold by top name stud farms for use in high level competition. They are often imported from Europe or elsewhere, with impressive bloodlines and have antecedents with international competition success. They're not likely to by purchased by the average first-time horse owner, and the prices aren't as impacted by market forces as the backyard riding horse prices are.
Most of us will be buying horses well below the $10,000 mark. A number of factors affect the price of horses, and several things have come into play in the last few years have driven the initial cost of a horse down, while driving the cost of keeping a horse up. An overall slump in the economy means fewer people all can afford to buy or keep horses. This means there are more horses for sale and fewer people to buy them. Many people have been forced to give their horses away or sell them cheaply because they can't afford to look after them.
Poor hay crops and rising feed and fuel costs can affect the number of horses for sale, and the asking prices of those horses in any given year. The side effect of the banning of horses for meat slaughter is lowered the price of some types of horses. This mainly affects horses that are elderly, unsound, young and/or untrained, but it does have a ripple effect into the general horse market.
Those looking for a first-time horse will probably need to have anywhere from $1500 to $3000 budgeted for the purchase. You may be able to find a gem for less than this, but having that amount will give you the greatest number of choices. Having more to spend will give you even more choices.
A free horse will probably live up to the old adage, 'never look a gift horse in the mouth'. Usually the horse will be a senior citizen, a youngster with poor prospects or little training, or a horse with behavioral issues. Yes, it's possible to get a really great free horse—like a senior citizen who is level-headed and serviceably sound; whose owner just wants a nice retirement home for it. However, these horses are rare and there's a possibility you're taking on someone's problem.
Likewise with a $500 to $1000 horse. These are often youngsters with little training or handling, or horses with soundness, conformation or behavioral issues. Of course, there's the exception to every rule—there are gems among lower priced or give-away horses, but it may take a keen eye and willingness to deal with difficult issues. There are many stories of people taking these 'sows ears' and making them into 'silk purses'. They might not be the right horses for first-time horse owners, however. A cheap horse may be more expensive in the long run if you have to contend with vet bills, specialized shoeing and paying trainers.
The way to make a horse worth more money is to ensure it is well trained, healthy, sound and well behaved. Bloodlines and conformation are important too, but I can forgive a horse obscure bloodlines and less than perfect conformation if it is a willing worker that is safe to be around and fun to ride. By buying a horse in the $1500 + range, you are probably buying a horse that has had the time and money put into it that makes it nice horse to own. It may have a good show record and probably is easy to clip, bathe, load on a trailer, stand for the farrier and veterinarian and has all the good manners that make a horse fun and easy to handle. The better the horse's pedigree and performance record, the more the asking price will be. Again, there is an exception to every rule. However, having a bigger budget means that you have more choice and be able to pass the unsuitable horses by without too much regret.
As you calculate how much you think you'll need to buy a horse, make sure you include sales taxes, transportation costs, and a pre-purchace veterinary exam. While these won't be part of the asking price, they are things you need to think about as you make a final decision. Make sure you have money to look after your horse and consider how you'll deal with veterinary emergencies if they arise. The initial cost of a horse may seem like a large expense but the day to day care really is the greater expense of horse ownership.