Are you in need of a new or used car? If you are responsible with your finances, odds are that you are searching for the best car that meets your needs (or wants) for the best price. After all, you don’t want to overpay for something. That would be like throwing money down the drain. Yet, when most of us go to purchase a car we don’t consider many of the hidden costs of buying a car. We often just look at the price of the car or perhaps the monthly payment.
Learning how to be debt free starts with making a smart choices when it comes to your finances. It means doing your research and being prepared. A car has a lot of other expenses associated with it than just the sticker price, and failing to consider the hidden costs of owning a car could leave you going into debt. I’ve already talked about why depreciation should be considered when buying a car, but what else should you consider when buying a car? What makes one car a better than the other?
6 Overlooked Expenses in Buying a Car
Whether you realize it or not, there are at least six commonly overlooked expenses that can affect how much you are really paying for the car. Making sure to compare these additional fees will allow you to make the best decision when it comes to finding the right car.
Financing: Are you going to finance the car? If so, you should consider the percentage rate of the loan that you are eligible for. Taking this into consideration is important because the age of the car can make a big difference on the total cost of the car. Getting a new car that is eligible for 0% financing might be a better option than buying used in some situations. Don’t assume this is the case though. Make sure to do do your homework.
Insurance: Have you talked to your insurance agent to estimate how much it will be to insure this new or used car? Different years, makes, and models have different rates when it comes to insurance. Odds are that a sports car is going to be more expensive to insure than a vehicle geared for a “family,” but you never know until you ask.
Maintenance: Have you considered the expected maintenance fees? To calculate maintenance issues, make sure to include not only the age of the car (maintenance fees increase with more years of use), but also consider whether it is foreign or domestic. While my wife and I thoroughly enjoy our Volkswagen Passat, the price to do repairs is slightly more expensive than a domestic vehicle. It doesn’t mean you should avoid foreign vehicles all together, but it is something to consider.
Fuel: Does the car require a premium grade of fuel or perhaps even diesel fuel. This is often overlooked cost, but having to pay $.10 or $.20 more per gallon can add up over several years of use.
MPG: With the recent trend towards increasing the miles per gallon in newer cars, this is being considered more and more these days. People are beginning to realize that a car with better gas mileage will save them money on fuel. Yet, don’t let this trick you into paying a lot more for a car just because it gets good gas mileage. While it is an important factor to consider, it should not be the sole factor.
Tires: Last but not least, make sure to consider the cost to replace your tires. If you are buying a used car, inspect the tires to calculate how long it will be until you have to replace tires. An important tip to consider is that SUV’s and trucks often cost more to replace the tires than a car. This is one of the reasons I went with a station wagon over an SUV. Why pay for the image of a car, when its more practical to buy the alternative?
The next time you are considering buying a car, make sure to take these factors into consideration to make sure that you are getting the best value for your money. It may force you to avoid the car of your dreams and buy a practical car, but your bank account will be better off as a result.
What other expenses do you consider when buying a car?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.