Automobiles are intertwined with American culture. For teens, they’re a symbol of freedom and maturity. As we grow, they often become our primary modes of transportation for work, school, practice and pleasure.
For most families, transportation represents their second largest expense category, behind housing. That’s why it’s important to understand that the total price of a vehicle extends far beyond its original price tag.
To help you navigate the maze of vehicles expenses, we’ve compiled a list of five questions that every driver needs to ask themselves:
- How much car can I afford? – When purchasing a new car, it’s important to research all your options and shop around for the best price, whether the vehicle is new or used. You also need to consider other factors outside the purchase price, such as maintenance costs, gas mileage, insurance and warranties. If the total cost exceeds 15% of your total income, then you should consider scaling back your purchasing plans. Consumers who buy “too much car” are more likely to fall deeper into debt and less likely to have extra cash on hand for emergencies.
- Should I buy a used vehicle? – To determine if you’re getting the best deal on a used vehicle, you need to research prices as well as vehicle history. The Kelley Blue Book (Kelly Blue Book) allows you to compare new and used car values by make and model. Research price ranges before visiting the dealer. Once you’ve narrowed down the possibilities, request a Car Fax (Carfax) report. This will tell you how the previous owner treated the vehicle, offering details into any problems or accidents. Many dealers provide Car Fax reports as a part of their standard purchasing procedures.
- Do I need a co-signer, or should I co-sign for someone else? – Auto loans are an effective way to build credit, yet most companies require a co-signer for young drivers or those without a strong credit history. A co-signer is responsible for making payments if the primary borrower is unable to make them. If the payments are late or skipped, the credit ratings of both the borrower and co-signer will suffer, which can prevent them from obtaining other lines of credit. Both parties need to be extremely cautious before entering into such an agreement. They also need to evaluate whether the loan is necessary for the driver’s specific needs. For instance, does the primary borrower absolutely need a $15,000 loan? Would a $5,000 used car fulfill the same transportation needs?
- How much will it cost to maintain the vehicle? – The total cost of a vehicle is much more than the original price tag. Drivers need to consider gas and maintenance costs too. Large trucks and SUVs require much more gas to operate than small cars. If the extra cargo space isn’t essential to your work or interests, and you’re struggling to keep up with maintenance costs, then you should consider “rightsizing” your auto needs with a smaller vehicle.Regardless of the make or model, regular maintenance is vital to extending the life of your vehicle. Skipping an oil change may save $40 now, but it can lead to hundreds of dollars in repairs down the road. In addition, properly maintained vehicles get better gas mileage.
- How much will it cost to insure the vehicle? – Car insurance rates are based on a number of factors including the history of the driver, type of vehicle, safety features and deductable. There are some factors that the insured can’t control, such as their age or location, but there are other factors they can. For instance, drivers can opt for safe, efficient vehicles rather than sports cars, which carry a heightened premium. They can also enroll in defensive driving school to ensure a traffic violation doesn’t appear on their insurance record. It’s also important to shop around for the best insurance rates. Each insurance company has different standards and caters to a different clientele. Request quotes from multiple agencies and compare both their rates and coverage.