DuxX / Getty Images / iStockphoto
With so many makes and models out there, choosing the right vehicle can be difficult. But before you worry too much, one of the first things you should do before heading to the dealership is to set a budget for your car purchase. This budget should cover more than the vehicle’s original purchase price. Ideally, you should also consider the additional costs associated with buying a car, such as maintenance, repairs, and petrol.
When buying a car, some people don’t consider all the additional costs that come with the purchase. This is especially common for people considering new, luxury, or high-end cars. Because these types of cars tend to have additional or simply higher costs that people don’t really consider.
If you are considering buying a car, luxury or not, you need to be aware of certain costs. GOBankingRates spoke with a financial expert, CEO Justin Albertynas. rate punkJeff Rose, CFP, Founder GoodFinancialCents.comChris Powers, CFP, AIF, AEP, Managing Partner Global Wealth Advisor To find out what people spend too much on when buying a car.
Here’s what they said:
depreciation expense
When buying a car, many people still buy the car at list price, which is at the upper end of their budget. One reason for this is that luxury cars can be seen as status symbols. However, regardless of the reason, the cost to be aware of is depreciation.
“I think a lot of times people make car buying decisions based on ego and other emotions,” Albertinas says. “For many people, it’s a status symbol, but it’s actually a rapidly depreciating asset, one of the fastest depreciating assets you can actually buy.” A car’s value is typically determined by its ownership. In his first year it falls by about 20%. ”
The average price of a new luxury car is about $75,000, which is tens of thousands of dollars more than a regular car. If it depreciates by 20% in the first year, that’s a $15,000 loss in value.
car insurance
In general, the cost of insuring a luxury car is higher than the cost of insuring a less expensive car. This is mainly due to the fact that luxury cars are expensive and require expensive specialized parts to repair.
“When buyers get excited about their chosen car on the scene, they often forget important aspects of car ownership,” Powers said. “Insuring that car can add a significant expense to your budget. Even if a buyer pays a lot for a luxury car, remember that luxury cars come with luxurious maintenance. It’s important to keep it.”
“Insurance premiums can vary widely depending on the car’s value, model and safety rating,” Albertinas added. “In most cases, this will be your biggest expense above list price.”
fuel
Currently, the average price of regular gasoline in the United States is approximately $3.75 per gallon.
“Beyond the sticker price, owners should be aware of a variety of additional costs,” Rose says. “For example, fuel costs about $2,390 a year.”
However, in some cases, luxury or sports cars require premium gasoline. Currently, premium gasoline costs $4.56 per gallon. If your new car requires premium fuel, you could end up spending much more money per year than buying another car.
Registration, taxes and fees
Your car purchase budget should also include registration fees, taxes, vehicle inspection, and other annual costs. Those fees alone cost about $762 on average, Rose said.
Some states impose additional fees on vehicles over a certain amount, which may apply to luxury cars. This surcharge does not include any additional state fees or sales tax.
“These costs can significantly increase your monthly payment, and it’s important to be aware of these costs to understand the true cost of vehicle ownership,” Rose says.
Maintenance costs
If you’ve ever owned a car, you’re probably familiar with maintenance costs. Generally, we recommend scheduled maintenance every 5,000 to 6,000 miles or every 6 months, whichever comes first. Major maintenance mostly needs to be done once a year.
“Oil changes, tire rotations and unforeseen repairs must be done as they will incur additional charges,” Albatinas said. “It’s best for him to set aside at least $1,000 for a year’s worth of repairs.”
However, this is for regular cars. If you own a luxury car, you could end up spending thousands of dollars on maintenance and repairs. This is especially true for manufacturers that require custom or specially imported parts.
According to CarEdge, the cost to maintain a BMW is approximately $1,931.20 per year, and the cost to maintain a Porsche is approximately $2,207.50 per year.
extended warranty
An extended warranty is an optional plan that typically begins after the original warranty expires. It’s designed to cover certain vehicle repairs, but they usually cost more than the expected repairs. Depending on your plan coverage and vehicle, it could cost you thousands of dollars more. It is also possible that your loan repayments will be reversed.
“We often meet people who end up ‘upside down’ their cars by taking out more on the loan than the car is worth. In our experience, one of the biggest causes If they sell you a warranty or additional services at a high price,” Powers said. “These warranties and surcharges typically cost thousands of dollars and can quickly ‘flip’ the buyer. A good rule of thumb before purchasing an extended warranty is to research your vehicle and ask yourself if it’s really worth paying the extra cost to purchase the warranty. ”
Upgrades and related features
Upgrades and similar features designed to make your vehicle look and feel more luxurious also come at a big expense.
“People can overspend on upgrades and features that don’t necessarily add value for their money, like cooled seats. They’re tempted to go for premium add-ons, more upscale trim, or the latest model. But if you consider a slightly older model or omit some luxury extras, you can save a lot of money without making big sacrifices in terms of functionality or reliability,” Rose said. I am.
dealer addon
When you buy a car, your dealer may try to get you to buy additional features. Some of these add-ons can help preserve your vehicle, while others are for aesthetic purposes only. Either way, it’s an additional cost worth considering.
“VIN etching, fabric protection, rust protection, etc. are often significantly more expensive when purchased through a dealer,” Albatinas says.
GOBankingRates Details
Source
