Need advice and help buying a car? This free lesson covers car buying tips and the things you should think about before making a purchase.
What is your car budget?
Do you want to exchange your old car for a newer one? Are you tired of having to depend on friends and family to get places? Whatever your reason for looking for a new or used car, it's important to keep a car budget in mind. Basically, this is the cost of owning and operating a vehicle.
Your car budget can include:
- Car payment
If you buy a new or used car, you will likely have a monthly car payment, unless you are fortunate enough to pay the total cost of the vehicle at one time. The amount of the car payment varies depending on a number of factors, including the down payment, which is the initial amount you put toward the purchase price. Car payments can vary from about $100 to more than $300 per month.
- Property (vehicle) tax
At the time you buy a car and each following year, you must pay a vehicle tax. When you pay the tax, you receive a sticker to put on your license plate as verification. It is illegal to drive a car without paying this tax. Taxes can be as little as $20 and as much as $100 per year depending on the vehicle. The more expensive the car, the more you pay in taxes.
- Vehicle inspection
Some states require owners to have their cars inspected to make sure the vehicle is safe to operate on the road. The cost of a vehicle inspection varies—generally $20 to $30. You may have to pay additional costs to get repairs done if your car fails inspection.
Based on how much you drive your car and how fuel efficient it is, you will likely spend about $45 to $75 per week for gas.
Car insurance is required by law in the United States. In case of an accident, you are financially responsible for any injury, death, or damage incurred. The cost of insurance—which could be liability, comprehensive, or collision—can vary based on the vehicle, your driving record, and some other factors. Generally, the newer the car is, the more it costs to insure.
- Maintenance and repairs
To help keep your car running smoothly, perform regular maintenance. You will probably want to get your oil changed every three months or every 3,000 to 5,000 miles, at an average cost of $30. You may also spend money on general items such as antifreeze and wiper blades. Also keep in mind unforeseen costs such as a dead battery, flat tire, or failed transmission.
If you regularly drive to a place where you have to pay for parking, consider the cost. While many employers provide free parking, some may not, so you may have to pay to park elsewhere.
Overall, your car budget will likely be anywhere from $1,000 to more than $5,000 per year. Costs vary based on car model, age and condition of the car, and other factors. Before you buy a new or used car, make sure you can afford such costs.
When possible, consider alternatives to driving your vehicle, such as public transportation, carpooling, biking, and walking.