Buying a new vehicle is one of the biggest purchases you will make in your life. You need to understand the financial details of the transaction before completing the purchase. The last thing you want to happen is to realize you are unable to afford the vehicle after you have already taken it home. This may seem like a complicated process, but it is actually quite simple when broken down the right way. These are the six financial areas you must consider when buying a new vehicle.
You will need to take out an insurance policy on your new vehicle before it can legally be driven on the road. This insurance policy must be started before you receive your new license plates. While every new vehicle needs to be insured, some policies will cost more than others. It will cost a lot less to insure a small sedan instead of a sports car. Make sure to get a quote from your insurance company before finalizing your vehicle purchase.
2- Fuel Efficiency
You can easily spend hundreds of dollars each month on gas if you do a lot of driving. Your exact fuel costs will be determined by the gas mileage of your new vehicle. Smaller cars are able to drive more miles on a gallon of gas than large trucks. You can also attempt to save at the gas pump by purchasing a hybrid or electric vehicle.
It is important to figure out how you are going to pay for the vehicle before heading to the dealership. You have the option of paying the full purchase price in cash or financing the vehicle with an auto loan. Financing is the most common option because most people do not have large amounts of cash in their accounts.
4- Your Down Payment
The first step in the auto financing process is determining how much money you will use as a down payment. It is generally recommended to put down at least 10% of the purchase price, but this is not always possible. A higher down payment will reduce the amount you need to finance while also giving you a better interest rate.
5- Monthly Car Payment
If you opt to finance the car, you will need to pay off the loan in monthly payments. Your payment is determined by the loan terms, interest rate, and the amount borrowed. You must make sure this monthly expense fits well within your budget before buying the vehicle. Luckily, there are several tools online that can help you estimate your monthly payment before buying a new vehicle.
6- Routine Maintenance
Every vehicle needs to be maintained on a routine basis in order to last a long time. This may be a normal part of car ownership, but some vehicles cost more to maintain than others. Exotic foreign cars typically cost the most to maintain because they require expert mechanics and unique parts that are hard to find. Opt for a popular car known for its longevity to reduce your maintenance costs.