Apart from buying a home, purchasing a new car is likely one of the most significant investments you’ll make. Unlike a house, which might appreciate over time and build equity, a car depreciates in value. This means that as soon as you drive it off the dealership lot, its worth immediately starts to decline and it will never again hold the same value as the day you bought it, unless it’s a classic car of course.
Hence, the financial aspect of buying a car is not to be taken lightly. Many people see cars as a status symbol, neglecting their primary purpose as a reliable means of transportation. Despite some cars having attractive features that set them apart, you should remember that the primary function of a vehicle is transportation, and everything else is additional.
Given this, when purchasing a car, it’s advisable to be budget-conscious. Along these lines, buyers often overlook the numerous other costs connected to buying a new car. So, what’s the actual cost of your new car? Necessary to consider are extra charges that you may not initially think about.
TAXES AND DMV FEES
When seeking estimates, inquire with the dealer about the additional costs of taxes and fees, and always be ready to negotiate the “out the door” expenses. Many dealers lure customers with low initial prices, only for you to discover a considerably higher estimate when signing the papers – generally about 10% more than you were quoted. When buying a new car, it’s wise to add an estimated 10% to the selling price for taxes and DMV fees.
INSURANCE PREMIUM
Insurance rates differ when you change cars. A new car or a coupé over a sedan? Expect a higher premium. Even the color of your car can impact your insurance costs. Contact your insurer to verify that your premium will be affordable and won’t come as a shock when you receive your first bill.
FUEL COST
Although modern cars are usually more fuel-efficient, if you’re transitioning to a larger vehicle, it’s likely to consume more fuel. Check the fuel efficiency of your desired car and integrate that into your monthly car budget to ascertain the genuine cost of owning it.
MAINTENANCE
Chances are you might not have paid much attention to the engine warning light in your previous car. Nevertheless, with a new car, you’ll probably want to maintain its good condition, committing to regular servicing and upkeep. It’s recommended to calculate estimated maintenance costs yearly to fully comprehend the financial obligation you’re undertaking.
The sticker price of a car is often just the tip of the iceberg, with many more ongoing costs to consider. Be sure you’re ready to shoulder this substantial financial commitment that doesn’t offer a return on your investment. Remember to avoid common car-buying errors and consider everything that should be included in a car-buying budget.
