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February 2, 2023
The average cost of a new car is more than $48,000 — up from around $30,000 just 10 years ago. That’s a whopping 60% increase. And according to Bankrate, the average monthly new car payment was $667 in 2022.
With the high cost of cars these days, it’s especially important to do your research and think carefully about what you can afford. But when budgeting for a vehicle, you have to look beyond the sticker price to fully understand the all-in cost of your ride.
When financing a new vehicle, your loan payment is a reflection of your purchase price and interest rate, as well as the term of your loan. The average loan term has become longer and longer in recent years. Currently the most common term is 72 months, and 84 months is not unusual. Longer loan terms can lower your monthly payment, but you’ll end up paying a lot more over the life of the loan.
Certainly, the least expensive option is to purchase a car outright in cash, but this isn’t possible for everyone. However, if you’re in a position to avoid financing, you could save a lot. Alternatively, leasing often carries lower up-front and monthly payments, but can subject you to other fees including excessive wear and mileage charges.
Maintenance, Mileage and Mother Nature
Budget for costs that occur regularly — and incidentally — like gas and occasional repairs. Take fuel efficiency into account when you’re shopping for a new car, and look into your vehicle’s maintenance costs. If parts are expensive or rare, that’s going to increase the cost of repairs.
You can help lower mechanic bills by keeping your vehicle in good working condition. But the cost of routine maintenance services should be a line item in your car budget. Make sure you can afford to get oil changes, brake work and other routine services done on the manufacturer’s recommended schedule, and be prepared to cover the costs of road service and emergency repairs. If you live in an area that needs special equipment, like snow tires, factor that in as well.
Taxes, Title and Tags
The down payment isn’t your only up-front cost when buying a car. Taxes, title, license and registration fees vary by state, so research them ahead of making a purchasing decision — and include them in your budget.
Make a Checklist
Depending on your situation, the full list of possible costs associated with operating your vehicle could be lengthy. It may include:
· Purchase price
· Financing costs
· Special equipment (e.g., snow tires)
· Roadside assistance
· Inspections (in some states)
· New tires
· Battery replacement
· Extended warranties
· Satellite radio services
· On-call services
But having a firm grasp of insurance options and costs should be on top of every car buyer’s to-do list. And never sacrifice needed coverage to save money. Insurance can cost more or less based on a variety of factors, but as a general rule, policies for more expensive cars will be pricier. Your rate can also be affected by where you live, your driving history, your use of the car — and sometimes even your credit history.
You may save significantly by bundling an auto policy with homeowners insurance. But whether you bundle or not, a We Insure agent will give you an apples-to-apples comparison of coverage options from many highly rated carriers to choose from. Unlike captive agents who can only sell you a policy from one insurer, our agents will comparison shop to find you the best deal. And we’ll hunt down all the discounts you’re qualified for.
The Biggest Budget Buster of Them All
Remember, if you aren’t adequately insured and end up in an accident, all the careful budgeting in the world isn’t going to make a difference. Auto insurance is foundational to responsible car ownership — and your overall financial wellness. Plus, it can be complex and individual needs may vary, so you don’t want to go it alone. That’s why getting expert advice is so critical.
A We Insure agent can help you find the coverage you need at a price you can afford. Contact your local agent for a fast and free quote so you can relax and enjoy your new ride.
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The information contained in this page is provided for general informational purposes only and may not be applicable to all situations. We Insure makes no guarantees of results from the use of this information.