When you purchase a car, you’ll need to pay for more than just the price of the car payment. Even if you pay cash, there are still things to budget for when purchasing a car. By budgeting carefully and planning for all the expenses that come with a car, you can help reduce financial stressors.
If you buy a car with cash, you don’t have to worry about this payment. However, many people purchase new or used cars with a loan, which they must repay monthly. Though it may be tempting to take those smaller monthly payments, remember that longer-term loans cost more in interest over time.
After car payments, insurance is often the largest expense. Many factors affect the cost of your premium, from your location to your driving history to the type of car you own. Even having your car under a loan can affect the premiums. Always consider insurance when working through the list of things to budget for when purchasing a car.
Repairs and Maintenance
Even if you buy a brand-new car, it’ll still require routine maintenance to remain in tip-top shape. Oil changes, tire rotations and replacements, and other servicing can quickly add up. Setting money aside for maintenance and repairs ensures that as soon as your car needs some TLC, you can afford it.
Don’t forget the annual registration costs, which vary greatly based on state and car. Some states will also require emissions testing and annual fees. Make sure you know how much your car costs annually and set a reminder on your calendar so you never deal with unpaid fees and expired tabs!
You might be able to afford the car payment for that shiny new car, but can you afford to drive it? Plan accordingly by tallying up how much you drive in an average month and then dividing it by the potential car’s MPG. This will tell you how much fuel you need and how much money you need to budget.
Budgeting for Your Car
To recap, your car budget is far more than just the initial car payment. You can easily tally up the entire cost of car ownership. Simply add up the following:
- Monthly loan payment (if applicable)
- Monthly insurance premium
- Repair fund
- Monthly gas budget
- Annual registration fees (divided by 12)
By accounting for these costs in advance as part of your budget, you can plan for car ownership without breaking the bank.
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