Is It The Right Time To Buy A Car?

newcar Buying a car can be exhilarating. But before you get swept up in the negotiation process, consider your lifestyle and budget. Do you really need a car? Can you afford one? Are you sure? Do you know the various expenses associated with car ownership? To you have room in your budget for some unexpected expenses?

My daughter just turned 16 and is looking for a car. Several seasoned car salesmen have told me that buying a car between January and May isn’t a good idea. Why? Costs are inflated for one reason: tax rebate checks. Wait until May and most of my contacts have said that I’ll save as much as $1,500.

Here are some of the questions we’re considering as we talk about buying a car for my teenager:

Do You “Need” to Buy a Car?

To determine whether you really need to buy a car in the first place, consider:

  • Necessity: If you don’t require a car for daily transportation, borrowing or renting a car only when you need one may be a more practical choice, especially if your budget is tight. As thrilling as it is to get a new car, it’s devastating to have to sell it because you can’t afford it. (been there done that)
  • Safety: If you already have a car, but you sense – or your mechanic tells you – that your car is no longer safe to drive, it’s time to replace your car with one that runs reliably and includes up-to-date safety features.
  • Savings: Sometimes it’s possible to save money by buying a car. For instance, if you spend a considerable amount of money on fuel, insurance, or repairs due to the condition of your current car, it may be more cost-effective to buy a newer pre-owned car.
  • Budget: Car ownership entails costs beyond the mere purchase price of the car. If you’re not sure you can budget for all of the costs of car ownership, it’s best to put off buying a car until you can cover all of the expenses involved.

Can You Afford a Car?

The expenses involved in owning any type of car include ownership costs (what you pay to buy or lease the car) as well as operating costs (what you pay to maintain the car). Operating costs can be very high, depending on the model you choose. Check out Consumer Reports on any new or used car you consider.

Ownership Costs

  • Purchase price: If you buy your car outright, you’ll likely spend at least $12,000 for a new car, or $4,000 for a well maintained pre-owned car.
  • Loan payments: If you’re not paying the purchase price in full, you have to secure a loan and pay it off in monthly installments. Loan payments vary depending on your down payment – the sum of money you pay up front toward the purchase price. A typical monthly payment is at least several hundred dollars.
  • Insurance: Most states require you to have car insurance that covers your potential liability in case you cause damage or personal injury. Costs vary depending on your car’s value, the types and levels of insurance you carry, your location, and your driving record.
  • Licensing and registration fees: Before you can drive your car legally, you have to pay various fees to your state for license plates and registration (and personal property taxes in my state). Most states charge these fees annually based on the current market value of your car. Costs vary widely by state; expect to spend at least $50–100 for initial licensing and registration fees. You’ll pay slightly less each year as your car depreciates in value.
  • Taxes: Most states charge sales tax and various other taxes when you purchase a car. These typically total at least 5% of the car’s purchase price.
  • Depreciation: When you buy a new or pre-owned car, you’re spending thousands of dollars on something that will undoubtedly lose value – and lose it quickly. Depreciation, the loss of value that your car suffers over time, determines the resale value, or current market value, of your car. The value of a car depreciates most rapidly in its first year of use. It actually loses value the moment you drive it off the lot!

Operating Costs

  • Fuel: Even the most fuel-efficient cars require that the average driver spend $50–100 per month on gasoline (assuming that gasoline is about $2.50 USD per gallon). If you plan to drive more than the average amount of 12,000 miles per year, or if your car is a gas guzzler (gets less than 20 miles per gallon), expect to spend even more on gasoline.
  • Maintenance: Standard maintenance costs include replacing oil, oil filters, coolant, and other fluids; rotating and changing tires; washing; and regular tune-ups. Expect to spend $25–100 every 3,000–5,000 miles for small maintenance items and $400–1,500 every other year for larger maintenance costs, such as new tires, new timing belts, and other items.
  • Repairs: All cars require occasional repairs beyond standard maintenance. Repairs can cost anywhere from $50–100 for minor work to several hundred or even thousands of dollars to replace major components, such as brakes or transmission.
  • Roadside service: If your car breaks down on the road, you need to pay for a tow truck ($75–125). Many drivers buy membership in various auto clubs, but you can also get this service as part of most car insurance policies.
  • Parking and storage: Unless you own or rent a home with a driveway or garage or live in a neighborhood with free parking space, you need to pay to park or store your car. Expect to pay at least $50–100 for monthly parking privileges, and considerably more if you live in a major city.

Photo by wishymom

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