One of the most common large financial transactions that people deal with in their lives is buying a car. Even though lots of people buy cars, few people are actually aware of all the financial implications and costs related to buying a car; it’s not just the price tag on the car you have to consider. To help you think about the actual cost of a car, check out these useful tips.
Can you afford to purchase a car?
Some people can pay cash for their cars, while other people have to take out loans in order to finance their purchases. Either way though, you need to sit down before you start shopping and figure out your budget. A budget will help you determine important things like whether you want to buy a new or used car and what types of cars you can afford to look at. It’s important to do this ahead of time because you don’t want to get emotionally attached to a car only to find out that you simply can’t afford it.
How much will your car depreciate?
It’s common knowledge that new cars dramatically depreciate the second you drive them out of the lot. However, used cars can also depreciate, although it does take more time. What you need to figure out is how this depreciation in value will affect you. For example, if you take out a loan to buy a car, and the car dramatically depreciates in value, you may find that you owe more money to your lender than the car is actually worth. Also, if you think you may want to sell the car in the near future, you should make sure the car will still be worth something within the next five years.
Can you afford insurance?
You may have enough money to buy the car itself, but do you have enough to get insurance as well? In many countries, you are not legally allowed to drive your car if you don’t have insurance, and if you can’t afford insurance, then what’s the point of buying a car in the first place? Buying a car is a one-time cost, but paying insurance is indefinite.
Can you afford the miscellaneous fees associated with owning a car?
If you want to drive your car, you’ll need to be able to fill it up with gas. In addition, you’ll need to be able to maintain your car by taking it to the mechanic for a checkup every once in a while, and if something goes wrong, you need to have enough money to repair the car. Also, in some cities, parking can cost a lot of money. For example, in New York City, the parking fees are so incredibly high that many people feel it’s simply not worthwhile to own a car in the first place.