To buy a car ? Don’t neglect these 7 expenses
From insurance to warranties to finance charges, there are many hidden costs when it comes to buying a car that are not reflected in the sticker price. If you’re shopping for a car, the best way to budget and narrow down your options is to consider the total cost of owning a car.
Before closing the deal on your next vehicle, make sure you get the big picture, including these often overlooked expenses.
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1. Auto insurance
Auto insurance is one of the biggest monthly expenses associated with owning a car. While the cost of insurance depends in part on your profile and driving history, it also largely depends on the make and model of your car. Luxury cars and sports cars, for example, are among the most expensive to insure. On the other hand, reliable family vehicles and cars with lots of safety features tend to be more affordable to insure.
That is why it is important to shop around and get auto insurance quotes for any vehicle you are considering. Knowing the difference between insurance costs can help you narrow down your choices if you are choosing between several different vehicles. The best cheap car insurance will come with a low monthly premium, and insurance companies will often give you a big discount for an upfront payment of six months or a year.
2. Routine maintenance
Car maintenance can cost nearly $ 800 a year on average, according to AAA, making it one of the biggest costs for owning a car. This number can also vary widely depending on the type of car you buy and its age.
Of course, newer cars will require less maintenance, but it can cost more than maintaining older used cars. But the make of the car – and even the model and year – can be just as important when it comes to estimating maintenance costs. Be sure to research the required maintenance for any car you look at, and pay attention to the cost of routine maintenance items – such as oil changes and filter changes – as well as common mechanical or electrical issues with it. your make and model of the car.
All new cars come with a manufacturer’s warranty, and some used cars may still have time on their manufacturer’s warranty if they are only a year or two old. If you are looking for a used car that is out of warranty, you will need to consider whether it is worth buying an extended warranty or a dealer warranty.
While these warranties can save you money if you need a major repair, they can also add several thousand dollars to the cost of the car. That being said, you can often negotiate with a dealer to significantly reduce the price of a warranty. If you decide you want a warranty, be sure to research all of your options and factor them into the purchase price of the car.
Gasoline is another big expense that can vary widely depending on the type of car you get. Even on cars of similar sizes, you may find that there is a substantial difference in gas mileage.
This is a cost that you will pay on a regular basis, so be sure to factor in your car’s fuel economy. Opting for a car with even slightly better gas mileage can save you a lot of money in the long run, especially if you use it for daily commuting or for long road trips.
5. Resale value
Many car buyers do not consider the resale value of a car at all. However, depreciation is the # 1 cost of owning a car – on average, your car loses $ 313 in value each month, according to AAA.
You can make it a point to look for cars that hold their value particularly well. This may not be important if you intend to keep your car for a long time, but if you think you could sell or trade it in the next few years, resale value should be a priority. Some brands of cars that tend to have high resale value include:
6. License, registration and taxes
This is a lower cost than some of the ones mentioned above, but it’s still important to factor this into your car purchase budget. Your license plate fees will be the same regardless of what car you buy, but some states calculate your license fee based on the value, age, or weight of your car.
Taxes vary from state to state, but in most cases the taxes you pay largely depend on the sale price or value of your vehicle. If you buy a car in one of the few states without sales tax, you won’t have to add it to the list.
7. Financial costs
Unless you’re paying for your car in cash, you’ll need to factor finance charges – or interest – into the overall cost of your monthly payments. Fortunately, if you have good credit, you should be able to qualify for a car loan at a fairly low interest rate. For example, if you qualify for a $ 15,000 car loan with an interest rate of 3.5% and pay it off in five years, you will end up spending $ 1,373 in interest over five years.
Be sure to shop around for pre-approval to get the lowest possible interest rate. You can also take your pre-approval letters to the dealership and ask if they offer financing that can beat all the rates offered by your local bank or credit union.
When you compare your favorite cars, adding estimates for these often overlooked costs will help you choose the best vehicle for you.