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  • There are lots of important decisions to make when buying a car: Do you need a truck for

  • the farm or a small car for the city? How important is gas mileage to you? What color

  • do you want?

  • Once you decide what car you want, figuring out what you can actually afford can seem

  • a bit complicated. Your monthly car payments might be affordable, but you also have to

  • keep in mind other costs youll have, like insurance paymentsregistration fees

  • and unpredictable expenses like a sudden hike in gas prices or the need for a big repair.

  • So, before you begin to shop around for a car, you might want to take a look at some

  • of these costs so youre not caught off guard.

  • First let�s figure out your budget. On average, people spend about fourteen to sixteen percent

  • of their annual income, before taxes, on their transportation budget. That�s a figure that

  • includes all the expenses of owning a carnot just your car payments, but your gas, insurance,

  • maintenance and repairs, and everything else as well.

  • So for our example, let�s use this as a guideline, and look at what this might be

  • for an annual income of fourty two thousand dollars.

  • To figure out your budget, well take sixteen percent of fourty two thousand. That gives

  • you six thousand seven hundred twenty dollars a year to spend on your car, or five hundred

  • sixty dollars a month.

  • So let�s look at the costs involved in getting a new, basic subcompact sedan that has a sticker

  • price of about sixteen thousand four hundred fifty dollars.

  • Now for any car, there are plenty of extra things you can get, like satellite radio or

  • a sunroof, which can drive up the price, but were going to forego the bells and whistles

  • and stick to a basic model.

  • And when you buy a new car, keep in mind that there are often extra fees in addition to

  • what you pay for the car itself. You might have fees for things like documentation, and

  • destination charges for getting the vehicle from the manufacturer to the lot.

  • Your registration fees may also be included, which can save you a trip to the DMV.

  • Some of the fees youll encounter, like registration, are non-negotiable because they

  • are required by your state, but some things, like documentation fees or the base price

  • of the car, may be flexible and open to some negotiating depending on where you buy your

  • car.

  • So let�s say that after negotiating the price of the car and the fees, and adding

  • on your local taxes, youre paying sixteen thousand seven hundred fifty dollars total.

  • And in this case, youre going to finance the car entirely. That means youre not

  • going to make any down payment or trade in another car. If you get a six-year loan at

  • a three point five percent interest rate, looking at an online calculator, your monthly

  • payments will be around two hundred sixty dollars.

  • But financing comes at a cost. In this case, you end up paying about one thousand eight

  • hundred fourty five dollars in interest on top of that sixteen thousand seven hundred

  • fifty dollars of principal over the course of your loan. So if you have the cash, you

  • may consider buying the car outright. Or if you have a few thousand to spend on a down

  • payment, you could lower your monthly payments and save in interest over time.

  • But for this example, let�s say you don�t, and youve got a two hundred sixty dollar

  • car payment.

  • Then there�s gas.

  • Let�s say this car gets thrity two miles to the gallon. And on average, you drive about

  • one thousand two hundred fifty miles per month. Twelve fifty miles divided by thirty two miles

  • per gallon gives us aboutthirty nine gallons of gas each month. If gas is around four dollars

  • per gallonthirty nine times fourwere looking at aboutone hundred fifty six

  • dollars a month on gas.

  • There�s also your car insurance. Insurance prices are based on a number of factors including

  • where you liveyour driving recordthe type of car youre drivingeven your

  • job. If youre figuring this out for yourself you might want to look at an insurance estimator

  • as rates can vary dramatically. Let�s say you use an insurance calculator, put in your

  • info, and see that youll get a rate of about one hundred dollars a month.

  • So, adding our monthly car payment of two sixty and an estimated gas expense of one

  • fifty six plus the one hundred for insurance, we already have a total of about five hundred

  • sixteen dollars per month.

  • Now let�s look at some more periodic expenses you might have, like regular maintenance:

  • generally speaking, every seventy five hundred miles or so, it�s recommended that you rotate

  • your tires and change your oil. If youre driving one thousand two hundred fifty miles

  • per month, that�s about fifteen thousand miles per year. Divide that by seventy five

  • hundred miles, and it looks like you might need to do this about twice a yearand

  • let�s say it costs you about eighty dollars or so each time for a total of one hundred

  • sixty dollars per year, although some new cars come with a service agreement that covers

  • some of these basic maintenance costs for the first few years.

  • Now going to a shop for regular maintenance can be a hassle and you may wonderis it

  • worth it? Well, skipping tire maintenance and oil changes can cost you in the long run.

  • A set of tires might last you longer if cared for properly. And a new set might cost you

  • around six hundred dollars.

  • Not changing the oil will eventually wear out your engine which could cost thousands

  • to replace. So that one hundred sixty dollars a year may be worth it over time.

  • For the first few years, with a new car, you probably won�t need to do much more maintenance

  • than thisif you do, it might be covered by your warranty.

  • Youll also have to re-register your car and probably get it inspected from time to

  • time. Depending on your state, this could be once a year or every few years and can

  • cost fourty five dollars to three hundred dollars or more. Let�s say your registration

  • and inspection will cost about two hundred dollars every two years, or another hundred

  • dollars per year.

  • So adding one hundred sixty for maintenance and another one hundred for registration and

  • inspection, we get two hundred sixty dollars per year

  • Divided by twelve monthsweve got, well, about twenty two dollars per month.

  • [show math: 260/12=21.6667]

  • and if we take our previous monthly expenses which were five hundred sixteen dollars, adding

  • twenty two weve got five thirty eight.

  • Then looking at our original budget of five hundred sixty dollars if we subtract five

  • thirty eight for our monthly expenses, that leaves us with twenty two dollars.

  • So, having calculated some of these costs of car ownership, we can see that this car

  • could be inside your budget.

  • Now you may be thinking about that extra twenty two dollars a monththat�s two hundred

  • sixty four dollars a year. Why not accessorize?

  • But having a little extra in your budget to cover unexpected costs is a good idea. It

  • may come in handy if there�s a sudden hike in the price of gas, or the cost of your insurance

  • goes up.

  • And once your warranty runs out, youll have to pay for any repairs you might have,

  • like replacing a headlight or an oxygen sensor or maybe even something bigger.

  • So it�s a good idea to keep these extra costs in mind when figuring out what you can

  • spend. If your car payments alone put a strain on your budget, you might find yourself the

  • owner of a car you can�t afford to drive. And if a new car is too much for your budget,

  • you might consider buying a used car, which we look at in another video.

There are lots of important decisions to make when buying a car: Do you need a truck for

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A2 US insurance maintenance gas budget registration monthly

The true cost of a car

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    噹噹 posted on 2017/04/17
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