Most young adults end up working toward their first major purchase of a new car in their twenties. This is true in the U.S. because over 85 percent of all Americans have a driver’s license.
Sometimes parents share a car for their beginner driver, but it is up to the young adult to purchase a vehicle on their own after securing a job upon graduating from high school or college. It is important to know what expenses to expect when buying a car at any age and to understand there is more to buying a car than just securing a loan for it.
Expenses To Consider Before A Car Purchase
When purchasing a car, you want to consider the total monthly expenses needed for owning and operating the vehicle. It is easy to think you can afford one just by knowing the amount you will owe each month for the loan payment, but there are other expenses to consider. Before you visit a dealership, you should have a clear idea of what you can afford.
- Loan Payments – One way to plan for your monthly payment is to get an estimate from loan providers or use a car payment calculator available online. There are some general rules to follow when deciding how much to spend. One is the 36 percent guide where you don’t spend more than 36% of your income on any type of loan including car loans. This often causes problems for drivers with lower incomes. A better guideline is for drivers not to spend more that 15 percent of their monthly income on car expenses.
- Gas – To determine the amount of money you will be spending on gas, add up the miles you drive to work and then add in mileage for your normal routine including trips to the store, social outings and weekends away. Use the price of gas and the car’s miles per gallon figure in order to estimate your monthly spending for gas.
- Insurance – You should ask your preferred insurance company to quote a rate based on the car you want to purchase. What you buy will make a difference in the quote knowing that a newer sports car will probably be more expensive than a used sedan. Replacement insurance is essential, raising the cost for some buyers who haven’t bothered with that before. Be sure to ask your insurance provider what potential ways you can save on insurance like advanced safety features or car alarms.
- Repairs – You may want to set aside money or have a saving plan to help pay for unexpected repairs. You most likely will have deductibles to be met on your insurance and know that a warranty doesn’t cover all types of repairs.
- Maintenance – Each vehicle, whether new or used, will have maintenance required each year. It is best to have any type of vehicle serviced at least every six months. You will need oil changes, windshield fluid and wipers, and at some point, new tires. Maintenance is very important in making sure your car is safe to drive.
- Miscellaneous expenses – Expenses that you may not think of when purchasing a car are the need for a parking pass, a highway perk pass, or yearly registration fees. Look up what these expenses may be for you and factor it into your overall monthly expenses for your car.
It’s Not All As Overwhelming As It Sounds
Millions of people have made this purchase before you. In fact 95 percent of American households own cars. Even with efforts being made to carpool and conserve, over 85 percent of U.S. workers still get to work by car. So while the list of expenses seems overwhelming, you can do this! If you follow the advice listed, you will be far more prepared than many who made this purchase before you.
One thing to consider when shopping for your first car is to visit dealerships that have one stop shopping for the car and loan. These companies are prepared to deal with first time car owners who may not have a credit track record. They also will have a number of new and used vehicles to choose from on their website and of course when you visit in person. Take your time when doing your research, set a budget and stick to it. You will be so glad you did and so happy when you drive your very first car purchase off of the lot.