Why you need to Consider the Cost of Ownership in a Car Purchase and not just the Car Price
When you contemplate buying a new car, you need to factor in not just what you put down upfront and fork over in your monthly payments. The cost of ownership is also what you spend on insurance, parking, car care and of course gas. And it wouldn't be a bad idea to include in the price of the car the sense of loss you'd feel not spending the money you spend on the car on something you really care about. When you sit down and try to figure out how to buy a car, your notes should include more than just the research you put in to determine mileage, and the test ride you take. Look at it this way: if you're 25 and the car price you're willing to work with is $30,000, what if you lowered your expectations and bought one that cost $20,000 instead? If you decide to save the difference in a Roth Individual Retirement Account, you should probably have an extra $150,000 the day you retire.
Here are a few things for your consideration for when you decide to buy a car:
1. If you are not paying a car payment every month now, think about what it'll be like when your income takes a $500 hit. You could test drive this by trying to live on $500 less for a couple of months to see how it works out.
2. Try not to roll over the loan you owe on your existing car over into the loan package for your new car. You won't be paying the same old interest on the old loan that you always did. A rolled over car finance plan doesn't have the collateral of the car for the lenders to feel secure over. You pay very high rates.
3. Make sure that you can obtain a loan at their interest rates. If you have poor credit, what you pay for your car loan could be so high as to be not worth it. Make sure that the car you buy isn't going to cost you in expensive running costs every day - special gas, special tires and so on. As a rule, taking out more than a fifth of your household income to spend on car payments and maintenance is a bad idea. Next to the family home we buy, spending on buying and maintaining a car are about the most draining expenses we ever experience. Keeping it down here would make a real difference.
4. Car loans have become so much more expensive now than before - for people with less than ideal credit. You could put off buying a car for a few months and use the time to work on your credit rating.
5. It's a fact of life - new cars are much-hyped, and the car price you pay for themwill be inflated too. It pays to wait. As wonderful as the new VW Beetle is, what would it be like if you had gone out and bought it at the premium they charged for it back then? You need to make sure you're not doing something like that picking an in-demand car.
6. Try to find out if you can get financing somewhere other than at the dealership. If you walk in with the financing taken care of elsewhere, it can give you a great deal of leverage over working down the car price quoted to you. All put together, the payments you make under par over the years easily add up to about twice the original car price. Anything you can do to help cure can go a long way.
And finally, as you consider the car price you are willing to pay, try to see how you can make it go on regular fuel, and not premium. Buying the cheapest that will allow your car to run without knocking, is proven to be good enough. And when you do fill it up, do it at a gas pump that charges the least. There are Internet sites like GasPriceWatch.com that'll send you text messages about where the cheapest gas goes in your neighborhood. Typically, driving over to a less pleasant neighborhood usually gets you cheaper gas. It's priced for the neighborhood.