Far too many people focus their attention solely on the monthly payment when contemplating the purchase of a car. And, while the payment is indeed an important thing to consider, fixating on it alone could get you into serious financial trouble.
It’s all too easy to overpay for a car while still driving off with the monthly payment you have in mind. This is why it’s important to look at the cost of the car rather than the amount of the payment. There are a number of other costs you should consider when buying a new car as well.
Let’s take a look at them.
Finance Charges
As we mentioned above, it’s very easy to pay more than you should for a car, even while taking on the monthly payment you want. This can be accomplished in a couple of different ways.
Focusing on the payment without paying attention to the interest rate is one of them. Your credit score determines the interest rate you should be afforded on a loan. However, you have to know your score to know what you qualify for. Armed with this information you can push for a better deal.
Extending the length of a loan is another way to make the payment lower while inflating the cost of the car. A good rule of thumb to follow is any given car is unaffordable if you must finance it longer than 60 months to make the payment fit into your budget.
Insurance
Drivers are required by law to carry auto insurance. Its cost varies according to a number of different factors. Among them are the age and gender of the driver, their ZIP code, the type of vehicle and whether they’re leasing vs. buying a car.
Younger drivers are considered to be less experienced and therefore more likely to have an accident. Female drivers tend to be involved in fewer accidents than males. ZIP codes come into play because crime rates vary in different areas. If you live in an area in which the rate is low, your insurance costs will be less.
Some vehicles are stolen more often than others, some cost more to repair and some encourage risky driving. Leased vehicles typically cost more to insure because drivers are required to carry the maximum coverage at the maximum limits of liability.
Maintenance
It can be surprising to learn one can purchase a three- to five-year old European luxury car for less than the cost of a new Asian economy car.
However, the costs of that European luxury car will be much higher when it comes to maintenance.
It’s critically important to consider the reliability of any car you’re thinking of buying and be certain the cost of keeping it running well will fit into your budget.
Fuel
A lot of people buy fuel-thirsty vehicles when gas prices are low, only to suffer when the price of petroleum goes up again. One of your key criteria when selecting a new vehicle should be fuel economy.
Gas prices are typically up more than they are down. Lulled into buying a fuel inefficient vehicle while the price of petrol is at ebb, you’ll be in for a terrible shock when it rises again.
These are just a few of the costs you should consider when buying a new car. Others include bridge and parking expenses, use taxes, license and registration costs, as well as any ancillary fees you might encounter at the dealership while conducting your transaction. Apprising yourself of these in advance will help you ensure you can afford to enjoy your purchase. Further reading and useful resources:
– Here’s what you should consider before buying a van.
– Tech that can help drivers and cyclers coexist safely.
– Why some people like to drive for pleasure?
