Tag Archive for Buying a New Car

How to Budget for Your First Car

How to Budget for Your First Car

How to Budget for Your First CarAcquiring your first car is a big step in your financial life. Most likely, your first car is going to be a used model, but that doesn?t matter. What?s important is that you are able to pay for it, and that it can get you around town successfully from day to day.

Of course, you don?t want to get in over your head from a financial perspective on this purchase. Overspending on your car could mean you have to get rid of it shortly after you pick it out. To avoid that outcome, check out these tips to help you budget for your first car.

Thinking Monthly

The first thing to consider is how money you can afford to spend on a monthly basis for your first car. Figure out how much money you make each month. Then add up how much of that money is already spoken for with other expenses.

Of course, you want to be able to save some money at the end of the month as well, so don?t be tempted to push your budget right on up to the max. Once you have picked out a number that you are comfortable with for your monthly expenditure on this purchase, you can then move on to the next step in budgeting for your first car.

Don?t Forget Insurance

Making the payments on your first car will be the biggest part of your?expense. But don?t forget about insurance as a part of the puzzle. The insurance premium that you need to pay each month is going to depend on a number of factors, including your driving history, the value of the vehicle, and more. Before you finalize the purchase of any car, make sure you research the cost of the insurance in order to get a clear picture of your total costs.

Buy or Lease

You have two options when you are going to acquire a car for the first time. You can buy the car (new or used), or you can lease it. Each option has advantages and disadvantages, so you will want to think about which one makes the most sense in your case.

Most leases have relatively tight mileage restrictions, so leasing might not be a good option if you tend to drive a lot of miles. Purchasing a car is usually seen as the better way to spend your money, but there are situations in which a lease makes more sense.

Plan for Maintenance Costs

One of the hidden expenses associated with owning a car is having routine maintenance performed on a periodic basis. You will need to change the oil from time to time based on the manufacturers recommendations. There will also be other costs such as tires, brakes, and more.

While these aren?t going to be expenses that you will incur every month, they should be considered. They are going to be part of the overall cost of operating the vehicle. You don?t want your car to become a point of stress within your budget, so think about these maintenance costs while you are building out your budget for this exciting purchase.

 

When did you get your first car? Can you think?anything else that should be included in the budget for your first car?

 

Photo courtesy of: State Farm

What Makes Vehicles so Costly to Insure?

What Makes Vehicles so Costly to Insure?
What Makes Vehicles so Costly to Insure?

Are you in the market for a new car? You may be considering factors, such as the style, size and cost of the vehicle. You may also be considering long-term costs associated with maintenance of the vehicle as well as its fuel economy. But there?s one more item you need to consider in your list: the cost of insuring the car you choose.

There are various factors that car insurance companies consider to determine how much you pay for your premium. Such as if you need car insurance in Maryland, Gaithersburg since it?s capital the associated risks are increased than surrounding cities. These include marital status, age, driving history, credit history as well as geographical location. However, according to a recent study by WalletHub, the type of car you?re driving also plays an important role in determining the cost of your car insurance.

What Influences Insurers

When it comes to types of cars, there are several factors that go into determining how much premium will be charged.

The following are some points to consider when choosing a car:

The Size of the Car

The size of the vehicle influences the cost of insurance. Smaller cars are considered higher risk to insure since they are more likely to be in an accident. This is because younger people prefer smaller cars and are riskier drivers. Accidents involving smaller cars are also more likely to result in fatalities. This makes small fast cars more expensive to insure.

On the other hand, large cars such as SUVs aren?t cheap to insure either. This is because they are likely to cause more damage to property and other cars when involved in an accident, not to mention they?re costlier to repair themselves. If you want cheap car insurance, you?d be safer sticking to the mid-sized cars.

Value of the Vehicle

High-end cars cost a lot more to replace or repair in case of an accident. It therefore makes sense that high-end cars attract higher premiums. High-end cars produced by foreign companies are especially costly to insure. This is because parts are not readily available locally. It can also be difficult replacing the vehicle in case it is written off.

If you?re looking for cheaper insurance premiums, avoid an expensive sticker price. You?ll also cut back on the cost of your maintenance.

Chances of the Car Being Stolen

When your car is stolen, your insurance will cater (if you have comprehensive coverage) the cost of replacing it. Insurance companies are therefore cautious about covering cars that are common targets amongst thieves. Aside from cars that are easy to break into (e.g. Honda Accord) thieves target cars that they can get rid of quickly. They also target cars whose parts are in high demand.

The Size of the Motor

How powerful is your car? Many people who invest in cars with powerful motors like to drive fast. The higher the horsepower on your vehicle the more likely it is to be involved in an accident. Cars with more powerful motors therefore attract higher insurance premiums.

So, Convertible, Hatchback or Minivan?

To start, you?ll want to take your time researching car insurance comparison sites to see what each vehicle type is fetching premium wise.

Minivans are among the cheapest cars to insure. These cars are commonly purchased by families because of their seating capacity and safety features. Married people with children are also thought to be safer drivers.

Hatchbacks attract relatively low insurance rates. Although they are smaller vehicles, they are affordable and often feature mid-sized motors.

Convertibles are considered high-end vehicles. They are often small and fast vehicles. While not heavily targeted for thefts, the horsepower, vehicle value, and size alone easily give convertibles the highest insurance rate out of these three types of vehicles.

What type of vehicle would you choose? Have you found other factors to influence the cost of insurance?

Photo courtesy of: BKD

3 Ways to Save on Your Next Car Loan

car loan

car loanMost people need to take out a loan when purchasing a car. There is no shame in that, of course ? cars cost tens of thousands of dollars, and very few of us have that kind of money just laying around. Fortunately, car loans usually come with very reasonable terms and a relatively short repayment time frame. If you care for your car properly, you should be able to continue driving it long after the loan has been satisfied, hopefully giving you time to save up money for you next car so you can avoid taking out a car loan next time.

Of course, even though car loans are fairly affordable in terms of interest rates and terms, you still want to save as much money as possible when making this large purchase. Keep these three tips in mind before you walk onto the dealership lot ready to make a deal on your next car loan.

Skip Some Options

You don?t need to buy a ?fully loaded? vehicle in order to be happy with your purchase. Many of the base model modern cars still include everything you need, such as automatic windows and locks, automatic transmission, safety features and more. As you move up into the higher end options, you can start to spend a lot of money on things like upgraded upholstery, a fancy stereo, and other technology.

In order to pick out the right car and right package for you, focus more on your budget than the options you have in front of you at the lot. Establish a price range for your purchase before you ever head out to buy the vehicle, and keep the final sale within that range no matter what. This can save you thousands on your car loan. But don’t skip features if they are truly important to you. For instance, you could get a car GPS?from China to save money and still have that feature in your vehicle.

Save for a Down Payment

The math is simple ? any money that you are able to put down on the purchase of your vehicle is money that won?t have to be borrowed in your car loan. If you can save up prior to making the purchase in order to have a significant down payment available, you will be able to greatly reduce the size of your car loan, and reduce the amount of interest you pay over the long run.

It is often possible to buy a vehicle with a very small down payment, or even no down payment at all, but you should try to avoid this strategy if possible.

Shop Around in Advance

Before you even head out to shop for a new vehicle, do some work on finding your financing ahead of time. You can likely apply for a car loan approval through your bank before you go shopping, which will give you a great idea of what you can afford and what your monthly payments are going to look like based on the interest rate and loan size.

While you might end up financing the purchase of your car through the dealership rather than your bank, it is nice to have that approval in your back pocket when it comes time to negotiate. If the dealer won?t give you terms that you like, you can always point to your bank offer as another financing option.

 

Have you ever taken out a car loan? Do you have any other tips to help save on a car loan?

 

Photo courtesy of: kaboompics

3 Things to Consider Before Buying a New Car

buying a new car

buying a new carIf you are spending more on car repairs than you budgeted for and have an older model car, it could be time to upgrade to a new model. But with so many different makes, models and price points, where do you start when you are thinking about buying a new car?

Before you rush right out and buy the first car you see on the lot, there are at least three things you should consider before buying a?new car.

Your Budget

If you have money set aside for a down payment, you have a good start already. Of course, it’s best to pay for cars in cash since they are a depreciating asset, but that may not always be possible. Talk to your banker before you start your vehicle search if you are going to need to finance the balance of your purchase.

They can help you determine how much of a loan payment you can reasonably absorb into your budget. Although, you should also have done your own calculation first because sometimes bankers will try to talk you into spending, and financing, more than necessary when you are buying a new car.

Depreciation

How long you plan to keep your new car should be a consideration when you first start looking for one. As mentioned, a car is a depreciating asset. The value of a car depreciates around 20 percent each year on average, with some models depreciating faster or slower than others than others.

For example, if you purchase a car for $40,000, at the end of one year it?s worth approximately $32,000, and at the end of year two, only $25,600.

This rate of depreciation continues for the first four years after you buy a new car, partly due to the auto industry’s tendency to redesign each model every four to five years. In fact, a new car?s price drops approximately 10% the moment you drive it off the lot. This is because the dealer would not be willing to pay the same amount for your car if you had to sell it back to them right after you bought it.

So, what drives the rate of depreciation? It?s partly driven by the number of miles you put on your car. Other factors are the color of your car and the customizations is has, because the more unique a car is the more likely it won?t appeal to just any buyer.

If resale values are of any concern to you, you will get the most out of your car if you keep it longer. Check the Kelly Blue Book value before you think about buying a new car to find out which models depreciate at a slower rate.

Features

Obviously certain features in a car will cost you more than others, so if you know ahead of time which features are more important than others for your needs, you can avoid wasting time looking at cars?that don?t fit the bill. For instance, a big, shiny, 4-wheel drive pick-up with a long box looks cool, but if you don?t need 4-wheel drive or an oversized truck bed for hauling things,?why pay for those more expensive features when you could opt for a 2-wheel drive with a short box or an entirely different type of vehicle instead.

Plus, the bigger the car the more gas it’ll use too, so it’ll cost you more up-front and in the long-run.

The bottom line is that buying a new car is going to cost you a bundle. In order to get the most for your money, it pays to remember these things before looking at or buying a new car.

 

Are you considering buying a new car? What things do you consider when shopping for a new car?

 

Photo courtesy of: aKs_phOtOs

Overlooked Costs When Buying a New Car

New Car

New CarBuying 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.

Insurance

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.

Maintenance

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.

Interest

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