In this episode of coping with moneywe are going to be talking about the real price and the real cost of buying a car.
What’s up, everyone? It’s his boy, Brandon Copeland, aka Professor Cope, and now he’s tuned in for another special episode of coping with money.
We have all heard that buying a car is a game and we have to learn to play it. There are all sorts of things that they tell you to do once you get to the dealership. But the truth is, after you’ve made that handshake deal and agreed on a price, that’s still not the full price you’re going to pay.
So today, we’re talking about all those extra fees and breaking down the true cost of buying a car.
The real cost of buying a car
Check the term of your loan
First, let’s check the term of your loan. Whether you’re buying or leasing, you’ll typically pay the price of your car through a series of monthly payments over a fixed term.
These may appear to be in addition to the agreed price, but there are actually additional costs depending on your down payment and the length of your loan. Longer terms mean smaller monthly payments, but it also means you’ll pay a lot more in interest over the life of the loan. Also, if you’re buying a used vehicle or planning to upgrade your vehicle in just a couple of years, a long-term loan could even outlast the life of your car.
Try to stick to a five-year loan to buy a new car and a three-year loan to buy a used car. Always review the terms and find a payment option that works for you. But in most cases, paying it off sooner is better.
remember your location
Remember your location. In addition to your monthly car payment, you’ll also pay upfront sales tax, which will vary depending on the state you buy it in. You can expect between 2% and 8%, so make sure you’re researching your state’s tax rate. If the price is right, you might even consider buying out of state.
In addition to this, don’t forget about your state’s registration fees. They usually have a flat rate and will be the same no matter what car you drive. But be sure to double check your location and factor them into the final cost.
Consider your insurance premiums
The next thing we have to consider is our insurance premiums. This is a big deal because insurance costs make up a fairly significant part of the total price of buying a car and depend on a wide variety of factors.
Your premium cost is affected by your age, where and how much you drive, your deductibles, your accident history, as well as the make, model and price of your car. That expensive red sports car may look better than the beat-up truck, but it will also cost a lot more to insure.
Once you know the car you plan to buy, consider getting estimates from three or four different insurance providers. This will give you a better idea of the true cost of buying your car and help you choose an insurance provider that suits your needs.
Make sure you get all the discounts you are entitled to. Discounts for safety features are automatically applied to your rate, but discounts related to a student driver or safe driving habits may not apply, so be sure to ask before locking in a rate with a new insurance provider.
Think fuel economy
Next, let’s talk about fuel economy, especially in a macroeconomic environment like the current one.
Does your car consume a lot of gasoline or does it make those kilometers count? Try to find a good balance between the features of your car and the time you can go without refilling the tank. And remember, if you’re commuting to work or have an upcoming road trip, you’ll start to feel the effects of your mileage almost immediately.
You can also consider a hybrid or electric car. These may cost more to buy, but could probably save money on operating costs in the long run. You can even receive a tax credit for driving an electric car, so do your research before you walk into the dealership.
Factor in maintenance cost
And finally, we have to take into account maintenance costs in the total purchase price of our vehicle.
It is not only the cost of buying our car, but also the cost of own that. If you’re buying your car, remember that used cars may be cheaper at first, but could require more maintenance in return; while new cars will cost you a higher price but should run longer without needing to be serviced.
When leasing a car, find out how much is covered by your warranty and how much is out of pocket. Also, you should check the manufacturer’s maintenance requirements, which may limit how your car can be repaired or where it can actually be serviced.
If you’re worried about regular maintenance costs, consider purchasing an extended warranty. Just be careful that the car doesn’t expire before the warranty does.
Cope’s final thoughts
Buying a car is one of the most unique purchases you will make several times in your life. There are so many factors that contribute to the final price of your car, which can change very slightly or by quite significant amounts.
As always, remember to assess your own situation. Find a car that fits your lifestyle and plan ahead to make sure you’re accounting for the full cost of buying a car.
As always, stay safe, stay blessed. I’ll see you next time in coping with money. Peace.
