By: Terrence Stoker
If you are thinking of buying a car you have probably already thought about the budget. The biggest cost factors are fuel and loan payments, but they are not the only ones. Not by a long shot.
Are you really aware of all the costs involved?
Car insurance – Car insurance is technically an optional extra, but it is one of those things you should really have. You never know what could happen, and no matter how carefully you drive you can’t prevent other people’s mistakes on the road. There are different kinds of insurance covers so make sure you are getting the right one for your needs and budget.
Interest – You are probably going to pay for your car by applying for financing. Most people don’t pay for a car in cash these days. However, with financing comes interest, which is not an insignificant amount. Thankfully you can reduce the interest by putting down a bigger down payment and selecting a short repayment term. However, this means saving a bit longer and paying off more every month, which does make things a bit tougher. But the payoff is that you save in the long run.
Taxes – The taxes you pay on a car could be included in the purchase price you see or they could be worked into your monthly payments. What taxes you pay also depends on the country where you are buying a car. For instance, pre-owned cars in South Africa will abide by South African tax laws. Nonetheless, you want to make sure you don’t get a nasty surprise down the line, so make sure whether the taxes are worked into the price you see or whether they’re an ‘extra’ cost you still need to factor in.
Repairs and maintenance – A vehicle warranty will cover most of the repair and maintenance expenses (though not necessarily everything) during the first few years of a new car. With a second-hand car, however, it is less likely you will get a warranty, and even if you do, it won’t be as extensive. Before you buy your car, do some research to find out how much repairs will cost you in general.
Fines – When buying a car we typically don’t think of paying fines as one of the expenses of owning a car. Unfortunately they do happen and they are not inexpensive. Getting regular speeding fines will add greatly to the expenses of owning a car, so try to reduce this by obeying the traffic laws at all times.
Depreciation – This is a cost factor many people don’t think of. As soon as you drive your car off the lot it starts to lose value. This is especially relevant in new cars. This isn’t an expense you’re actively paying like taxes, but it does need to be taken into account, particularly when the time comes to trade your car in. Remember that the better you look after your car, the more value it will retain.
If you really want to plan your long-term budget properly, you need to factor in all these additional costs. While these aren’t exactly ‘hidden’ costs, you could easily forget to include them in your budget.
