Owning your own car can certainly make life much easier. And it’s fun too. If you happen to live in an urban area where you can access Uber, Lyft and public transportation, you may be able to skip the car. But, if you live in more outlying areas or if you have kids, buying a car is a necessity. Before you settle on that new or used car, sit down and calculate all the costs involved, in addition to the actual price of the car. Buying a car means monthly car payments (assuming you do not pay in cash) and a number of other recurring or spontaneous expenses, including fuel. Insert monthly estimates of these expenses into your current budget and first determine if you can afford a car or how much of a car you can afford. You will save yourself a lot of financial stress later. Here are some of the major expenses that should go into your car buying budget.
Licensing, Registration and Taxes
These expenses happen only once, at the time you purchase the car. But they are unavoidable and failure to register and license your vehicle could result in criminal charges. Failure to pay the taxes will result in the government breathing down your neck. If you take the dealer financing, these fees are oftentimes rolled into the total loan. If you secure outside financing, which we recommend (see below) then you will pay these costs separately. Tax, title and licensing fees can cost as much as $1,000, it depends upon a number of factors. You can obtain a good estimate by checking with your state vehicle agency before you finalize the deal.
Financing
If you did not save up money for buying a car, then you will need financing. What the dealer offers is not necessarily favorable to you. In fact, it could place your entire car purchase out of reach. But, if you need a loan, here are some important tips.
- Empower yourself with financing before you head out to the dealerships. The less you have to finance the better it will be.
- Try to put some money down. This way more of the car will actually belong to you and not the lender.
- Be sure you can afford the monthly payments. If you miss your auto loan payments, you could face repossession of your car and seriously damage your credit rating.
- You can easily apply online for an auto loan from Peerform which will make buying a car much more enjoyable. Peerform’s P2P platform is easy to use, you will have your approval quickly and the money in your hand in time to go shopping.
Automobile Insurance
Driving without insurance will result in a day at court. It will cost you fines, points on your license, and even loss of your license if you fail to take care of the situation as soon as possible. If you should be involved in an accident, and you do not have insurance, the outcome is going to be much worse for you. When buying a car, insurance is a must have. But, like all things, it pays to shop around. All insurance is not created equal, and there are wide varieties in pricing schemes. Much of it is based on where you live, as insurance carriers calculate the risk to them depending upon the level of congestion in the place where you are driving. Age of drivers, age of the car, model—all of these go into determining the amount of insurance you will need to pay. Your credit standing also impacts the amount of your insurance. Yet another reason to reduce debt and get in the habit of paying your bills on time. There are some good resources for comparing insurance plans, such as Zebra, and Nerdwallet. Also don’t be shy about asking for discounts.
Maintenance
Routine maintenance is the secret to keeping your car running for as long as possible. Some maintenance jobs need to be done at regular intervals based upon miles or time. You don’t want to miss these. Create a calendar or set up an alert system either on your digital device or through your mechanic. These days, cars are like computers on wheels, their systems have become extremely complicated and complex. Yet on the other hand, diagnosis has become much more accurate. It pays to utilize a maintenance center that has skilled mechanics capable of dealing with the high-tech car. Routine maintenance tasks that you do not want to skip are: oil change, tire rotation, replenishing fluids and so forth. According to AAA, maintenance costs average around $767 per year.
Repairs
Unfortunately, no matter how luxurious the car, it will eventually break down. If something happens while the car is still under warranty, no problem. But, usually everything works great until the warranty is no longer current. And, things tend to break at the time when you are least able to afford it. First of all, set aside an emergency repair fund. Include money not only for the repairs, but also for a rental, if your maintenance shop does not provide a loaner.
Value Depreciation
The longer you have your car, the less valuable it becomes. If you intend to hold on to the car until it no longer moves, then this will not be so important to you. But most consumers are trading their cars every few years. In this case it makes a difference what car you buy. Some depreciate less and will earn you more money on a trade-in or sale. If you think you will want to trade up or sell your car in the near future, add this to your decision-making matrix.
Buying a car can be lots of fun, especially with all the new models to test-drive. With a little financial homework, preparation, and cash 0n hand, either from your savings or a personal online loan, your car buying experience should lead to many happy miles and freedom from stress.
