- Calculate the monthly payment and interest expenses of a car loan
- Compare costs and pros and cons of leasing, owning a new car, and owning a used car
- Determine the costs associated with operating a car, such as gas mileage, fuel costs, and savings for maintenance expenses
There are people who don’t need a car and won’t purchase one. But for many people, whether or not to have a car is not a question, it is a basic necessity.
Obtaining a car can be daunting. There are a lot of things to consider when buying a car such as which model and features you want, how will you fund your purchase, and the additional costs of owning a car.
The Basics of Car Purchasing
The biggest questions you will answer before purchasing a car are, what do you want and what do you need?
Does it have to be new? Does it have to be a make and model you are familiar with? Does it have to have assisted driving? What other details are important to you? For a new vehicle, every feature beyond standard features comes with additional cost, which leads to the question that constrains all of your decisions about a car.
How much can you afford to spend on a car? When considering how much you can afford to spend on a car you must consider other costs besides the car payment. What you can afford must include insurance costs, maintenance, and upkeep. Once you have this in mind, you can search for a car that matches, as closely as possible, what you want and can afford.
Most, if not all, dealers have websites that you can search through to identify the car you want.
It is important to know when looking at cars at a dealership that the sticker price of the car, called the manufacturer’s suggested retail price (MSRP), or the negotiated price you arrive at, isn’t the end of the cost to buying a car. There are many fees that accompany the purchase of the car, and perhaps even sales tax. These include but aren’t necessarily limited to the following:
- the title and registration fee, which includes registering your car with the state, getting the license plate, and assigning the title of the car to the lender. This cannot be avoided.
- a destination fee, which covers the cost of delivering the vehicle to the dealer
- a documentation fee, sometimes referred to a processing fee of handling fee, is the cost of all the paperwork the dealer did to get you the car
- a dealer preparation fee, which is for washing the car and other preparation of that sort. You should try to negotiate that out of the cost if the dealer tries to charge for that
- extended warranties and maintenance plans, which help cover some of the costs of caring for the car
- sales tax (if applicable in your state)
You could pay for these immediately, but they are often added to the financing of the car, meaning they become part of the principal of your loan.