Buying a new car can be an exciting time. You get to trade in your old ride for something fresh, hopefully with better gas mileage and more features than your old one had. If you spend a lot of time in your car, as many people do, it is a treat to be able to move up into a “new” vehicle.
Of course, buying a car is not a cheap thing to do, regardless if it’s new or used. That said, new cars are rather expensive, even if you aren’t splurging for a high-end model. You are probably looking a sticker price of $20,000 or more, depending on the model you are looking at. While that price alone is enough to make you want to start pinching your pennies, there are also other related expenses to having a new car that you need to take into consideration.
Buying a New Car Means Taxes
Just as with anything else you buy, taxes will be a significant part of your new car purchase. However, when you are talking about such an expensive item, taxes start to become much more significant as opposed to what you’d have on more common, everyday purchases. The taxes on your car purchase can easily be several thousand dollars so be sure to pay attention to that portion of the cost as well.
When you are trying to figure out how much car you can afford, don’t just look at the sticker price. You will also want to add in taxes and fees to get a better idea of how much money you will be spending on that new or used car.
If you are trading in an old car to buy a new one, you already have auto insurance…well at least hopefully you do. Insuring a newer, more valuable car is going to be more expensive than insuring your old one. Your premiums are sure to go up, and you should find out how much before you buy the car.
Contact your current insurance company and ask for a quote based on the car you are considering. This additional monthly expense needs to be taken into the bigger picture of the overall cost to own. Every time I have bought a new to me car one of the of the first things I do prior to making the final decision is calling my insurance provider to see what kind of an increase in cost we’ll be dealing with.
For drivers of older model cars, maintenance is something that might have fallen off your radar over the years. Once a car hits a certain mileage, some owners might start to neglect taking the vehicle in for service and just decide that they will buy a new car once the old one breaks down.
If this sounds like you, remember that you will need to perform regular maintenance on your new car to protect it for the long run. That means frequent oil changes and periodic service visits back to the dealer or mechanic. Add in this cost as well when deciding if you can afford the car. We actually save money specifically for taking care of car repairs. That way when we need to take our car into the shop we’re prepared to pay for the bill as opposed to scrambling for ways to pay for it.
Finally, assuming you are borrowing the money to purchase your car, you will be paying interest on the loan that you take out. With good credit, you should be able to get a relatively low percentage rate on your auto loan, especially in today’s interest rate climate. However, if you’re not able to secure a decent interest rate you will want to factor that expense into your overall purchasing decision. Of course, there’s always the option to buy the car straight out and not deal with the nasty loan but that’s just me.
When was the last time you bought a new or used car? What expense caught you by surprise? Have you ever bought a car in cash before?
Photo courtesy of: NRMA Motoring