If you’ve never owned a car before, it can be easy to underestimate all of the different expenses that you’ll face beyond the initial purchase of the car. Before deciding on a particular car or when making the decision about the best time to purchase one, remember to work the following into your budget as well, which can add up to significantly over time:
Unless you never plan on using your car or you buy an electric car, the cost of gas isn’t something you can get around. If gas prices are high and your daily commute is a long one, this can be an especially significant expense to budget for.
How to lower these costs: You can eliminate these costs entirely by purchasing an electric car, or lower them by purchasing a fuel-efficient car, such as a hybrid vehicle. At the very least, you might want to avoid vehicles with poor gas mileage if you plan on driving a lot and looking to cut back on expenses.
Financing charges are another unavoidable (and overlooked) expense of car ownership if you’re planning on taking out a car loan. This is often an underestimated expense of owning a car because the interest charges are built into the monthly car payments and may not seem like much, but over the course of the loan, can add thousands onto the cost of the car.
How to lower these costs: Avoid financing charges by skipping the car loan completely and saving up enough cash to buy your car in full—even if it means opting for a cheaper model. Alternatively, try putting down a larger down payment, which can help to lower your monthly car payments and potentially get you a better interest rate. If you have bad or just so-so credit, hold off on getting a car loan until you improve it, as good credit can help you to get a better interest rate.
A much needed repair can happen at anytime, and it can cost hundreds (or even thousands) of dollars. Many drivers are completely taken off guard when it comes to these costly repairs, so it’s important to always have enough money in your emergency fund, just in case.
How to lower these costs: If it’s within your budget, opt for a brand new car or a certified pre-owned car so that you’re protected under a warranty. Once the warranty is up, it’s important to maintain your car’s recommended maintenance schedule. It may be a hassle, and not to mention just mean extra costs to factor in, but can help prevent very serious (and very expensive) problems from developing later on.
Some cars will hold their value better than others, but for the most part, cars depreciate the moment they’re purchased and driven out of the dealership. This means that unlike a home (which can easily maintain its value or even increase in value many years later), you’ll likely discover that you won’t get nearly as much for your car when it’s time to sell it or trade it in. Depreciation just comes with the territory when it comes to car ownership, but it’s easily one of the most underestimated expenses.
How to lower these costs: Aside from purchasing a vehicle that tends to be rare, in high demand, and maintains its value, it can be almost impossible to avoid this expense if you’re buying a car. One way to get yourself in a new car and without worrying about depreciation, however, is to lease a car instead of buy one. Depending on the type of car you want to get, your budget, how often you drive and other factors, a lease might make more sense for you.
Do you need cash to purchase a car? Peachtree Financial Solutions may be able to help if you’re receiving long-term structured settlement payments. Contact Peachtree today to learn more about selling future payments to receive your money sooner and in one lump sum.
Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.