Very few things in life cost more than a new car, so buying a set of wheels shouldn’t be taken lightly. From reviewing makes and models to selecting affordable financing, doing a little advanced research ensures reliable, affordable motoring. If you jump in without the knowledge and resources to follow-through, however, costly car commitments can quickly sour your financial flow.
The key to avoiding trouble with your car loan is looking beyond the cost of closing your new car deal. The true cost of running a car includes its purchase price and the associated interest charges, but there is additional spending to account for when setting your motoring budget. Before making a buy, it’s important to weigh the purchase price, interest rate, operating costs, insurance premiums, and whatever other expenses come with ownership.
What To Expect From Your Motoring Budget
Cars are more than simple conveyance. Not only can they be status symbols, but there is a certain amount of personal satisfaction being able to afford the type of car you want to own. Unfortunately, when cash flow doesn’t keep pace with your motoring expectations, a car can become something of a liability. For this reason, it is important to set yourself on a sustainable path, buying a car you can afford to keep. Consider the following costs before signing a purchase contract.
Interest and Finance Fees – The sale price you agree to pay is an important consideration, furnishing a spending baseline from which to compare makes and models. But the cost of financing is equally as important. Using online resources to compare car loans gives you the opportunity to evaluate terms side by side, before selecting a loan provider and moving forward with your transaction.
Is there a loan initiation fee, charged before issuing funds? What’s the annual APR for the loan? Can you prepay without penalties? Are discounts available for automatic repayment, taken directly from your account each month? Answering these and other questions about car loans will guide you to the best available options, within your budget.
Motoring Offences – A history of motoring offences can work against you with insurance firms, and the cost of citations can also take a bite out of your motoring budget. Don’t learn this lesson the hard way. Instead, keep costs down by steering clear of incidents on the road. Accidents happen, but minding your speed and taking a defensive approach can keep you out of most scrapes and eliminate this unnecessary expense from your bottom line.
Insurance Cover – Once you’ve settled on a few models you’re interested in, comparing the cost of insurance can help pare the number even further. Performance cars and other specialized vehicles are more expensive to insure than ordinary cars, so if you’re out to keep costs down, avoid luxury and high performance models.
Tax – Changes to Vehicle Excise Duty (VED) have made the tax more complicated for some motorists, but you should be able to estimate your tax before buying a car. First year rates for VED are still based upon CO2 emissions. After the first year a standard rate is applied, simplifying payment. The standard rate for petrol cars is around £130-£140, but luxury car buyers should also be aware of an expensive tax added to high-end cars. From the second through the six years, an additional £310 is tacked-on for vehicles with list prices of more than £40,000. Diesel vehicles also receive special treatment under the terms of the tax, so check the figures before buying a car.
Petrol – You can’t always predict the price of petrol, but you must factor-in the cost of fuel when working out your motoring budget. Approaching the new year, UK drivers currently face the highest petrol prices seen in four years, adding a seasonal premium to the cost of holiday travel. As you work out the numbers, projecting fuel costs plug in a five-year average price for petrol and calculate the cost of a customary week’s travel. Your actual spending may prove more or less, but the estimate gives you a number to work with, when comparing cars.
A financial reality check can keep you from making costly car buying mistakes. For results you can truly afford, choose a sensible car and financing with terms you can manage. Most importantly, consider the true cost of running a car, including expenses such as servicing, tax, insurance, and financing.