Hidden Costs Impacting Car Payments and Budgeting for Buying a Car

Hidden Costs

State and Local Taxes

Only three states don’t tax a car purchase so unless you live in one of those, figure on adding 4 to 7 percent onto the purchase price of the car.

State Motorized Vehicle Fees

Tags, title, and registration fees are needed to get you legally on the road and should be added to your budget.

Dealer Fees

Dealers charge fees to prep your car, process the paperwork, and set up your financing for your car loan. It adds up – plan to add a few hundred dollars to your budget.

State and Local Property Tax

Count on this one every year – it’s a good one to permanently attach to your annual car budget.

Auto Insurance

The newer the car the more the insurance cost — the sportier the car the more the insurance cost and if you take out a loan be sure to ask your lender for the insurance coverage requirements. Then, talk to an agent to get the bottom line costs to add to your budget.

Be sure to calculate these top 5 hidden costs into your budget before you make your purchase and save yourself 5 unwanted headaches.

Top 5 Considerations When Budgeting for Buying a Car

There’s a lot to consider when you’re budgeting for buying a car. Here are the top 5 things you need to know before you buy.

#5: Play the Field Go ahead and dream, Explore all the options and see what’s available. You’re probably only buying a car once every five to seven years, so see what’s out there. Cars are fun and there are always new and exciting options to explore. You’ll have to run all the numbers before you buy, but what’s the harm in looking?

#4: Run the Numbers Now that that’s out of your system, you’re probably ready to settle down. Take a few minutes, sit down and run some numbers. It’s not as much fun but you should plan your budget before you visit a used car dealer. Having a financial plan and a well-thought-out budget can help you avoid heartache, and financial problems, down the road.

#3: Make Some Room. If you’re replacing a car, and perhaps taking out a new car loan, you’ve probably already worked all the costs into your monthly budget, If you’re buying a car for the first time, you’re going to need to do some math. First add up all your monthly expenses like rent, food, insurance, and savings. Then, subtract that number from your take home pay. You should then allocate about 15% to 20% of what’s left to your car budget.

#2: Don’t Forget the Extras When you’re calculating your budget make sure you include things like auto insurance, gas, maintenance, and taxes. We all have to pay them and, include a little bit for road trips to the beach or an occasional parking ticket. Underestimating these expenses, and not planning for the unexpected, can put you into a real financial jam.

#1: Be Real We all hope you’re going to get that big raise or a killer bonus – but you can’t bank on that. It is much better to buy the car you can afford today. You’ll be better prepared for life’s unexpected surprises, both good and bad, if you plan smart and, who knows, if that bonus does come through you might find yourself looking for a great new car! To really get the most enjoyment out of your new vehicle make sure all is fine with your personal bottom line so you can pay with ease and on-time!


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