How to Look at the Big Picture when Buying a Car

15290744_mInvesting in a car can be a daunting task and can take a bit hit on your finances. You not only have to consider the down payment, but what the running costs will be over time. Before you set foot on the car lot, it’s helpful to define what type of car will best fit with your lifestyle and means. For example, new drivers may want to stick to small, efficient city cars to keep insurance and fuel costs down while factors like safety and storage would be more important to a family. There’s also the question of whether to buy new or used. It’s a lot to think about, but if you want to make sure that your ultimate choice will fit in with your monthly budget you’ll want to factor the following running costs into your calculations.

 

Depreciation

One of the biggest hits you take when buying a new car in particular is the price of depreciation. There are three major factors driving depreciation, including mileage, condition, and the age of a car. When a replacement model is announced for a particular make and model, the existing design plummets in value. A car can lose over half of its value in just three years, which is important to keep in mind if you were planning on viewing this major purchase as an investment. As you compare models, be sure to look at residual values to find a car that depreciates slowly. This will guarantee that you get more of your money back when the time comes to sell.

Car Financing

If you can’t afford to pay for the full value of your vehicle up front, you’ll need to take out an auto loan to help pay for the car in installments. In addition to the monthly amount, pay particular attention to the interest rates, length of the loan, and whether or not there are any other hidden fees.

Car Insurance

Your car insurance premium can take a major hit out of your budget. As you’re reading a car review, be sure to look at the car’s average cost of insurance and safety rating. For instance, click here to see how the Toyota Kluger stacks up when it comes to safety, reliability, and other factors that an insurance company might take into consideration. Although you can’t change factors like your age and occupation, you can change the type of car you drive.

Fuel Efficiency

Fuel economy is one of those variable running costs that are immediately noticeable to drivers. Although something like depreciation or high interest rates could end up costing you more money in the long run, you’ll notice the weekly fuel bills more. Naturally, you don’t want to purchase a gas-guzzling SUV if you’re on a tight budget but the difference between a model giving 35 mpg and one giving 30 mpg is really not so important. If efficiency is important to you, think about choosing a model that uses diesel, or save up for a hybrid.

New cars will come with manufacturer warranties, but it’s also important to think about the cost of service and maintenance over time. Popular cars with parts that are easy to replace will cost less than rarer sports cars or fully electric vehicles, for example. These are just a few of the major factors to consider as you’re trying to work the cost of a car into your budget, which can make a world of difference in the long run.

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2 Comments

  1. Me and my husband are still discussing if we should buy a new car. For me, it’s just a waste of money because we can easily commute without having a car. I know owning a car will have a high maintenance, but in the other way it has advantages too. Anyway, we still have one year to think and decide on that one.

    • Hi Clarisse,

      I’m not sure I could make do without a car, just because of the nature of my evening shifts. Although the bus is a block away it just takes too long to get anywhere, and most of the time its just easier for groceries etc.

      But you don’t need to go out and buy a brand new car either – a good used car is worth gold. I drive a 2003 corolla. Although we have to put work into it every so often, its still cheaper than having to buy a new one! 🙂

      Cheers
      Avrom

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