Buying a vehicle is an important decision in an individuals life. Whether you are purchasing your first car or your tenth, it should be considered thoroughly and with a great deal of care before ever signing your name on the dotted line of a contract. One of the biggest things to consider when buying a vehicle for your personal, work, or family needs is the budget within which you want to stay. The following are some of the items that you will want to consider and look for when budgeting for your next vehicle.
Loan Payments
While paying for a vehicle with cash or capitol on hand is possible, it is highly unlikely that you will have the thousands of dollars necessary for a newer model vehicle. For that reason, it is more common that you will look for a loan in order to fill in the gaps between the money you have and the cost of the vehicle. These loans can vary in the type and amount of money that they provide to an individual upfront.
The important thing to remember is, however, that these loans are borrowed money and will need to be paid back across time, with an interest rate or fee assessed. These monthly loan installments should be considered within the monthly budget for your vehicle. It is recommended by the Bureau of Motor Vehicles that the total for car payments and loan installments does not exceed twenty percent of your gross wages. This will help to ensure that you have enough money left over for other important expenses.
In order to obtain a loan, you will need to find a lending institution that will offer you the funds necessary and that are allowed based upon your financial history. A lending institution will look at your current income, outstanding debt, and other financial information in order to assess how much they are willing to offer you for your purchase. It may be possible that your lending institution will offer you more than you can truly afford to pay back and it is vital that you are discerning in the amount that you borrow. It is also important that you scrutinize and fully understand the length of the loan and how much interest will accrue over time. Have your bank or lending institution break down your options in monthly installments and choose carefully the amount that you borrow. This monthly amount will need to be included in your vehicle budget, and the auto loan calculators available at Auto Credit Express will help you determine what you can realistically swing.
Maintenance
Part of owning a vehicle is caring for it. There are foreseeable costs that you will want to and can consider when assessing your monthly or annual vehicle budget. You will want to consider expenses such as tires, oil changes, alignments, and routine maintenance costs. These are predictable to an extent and can be very useful to calculate annually. This will, then, allow you to break down payments across the months.
Unfortunately, there are other expenses when it comes to a vehicle that can arise spontaneously or due to an accident. These costs can really put a dent into the disposable income that you have on hand and may require you to look elsewhere for funds, if you are not prepared. Though you will not know the future and cannot say how much or when these costs will become an issue, it is important that you save money monthly to ensure that you have some monies put back in the event of an emergency. A small portion put back on a monthly basis and reserved specifically for surprise maintenance, as opposed to expected maintenance, can help to ensure that you are better prepared for these situations.
Insurance Costs
One of the most important costs that you will have when using a vehicle is the cost of insurance. Insurance is necessary in the United States in order for a vehicle to run on the road. Otherwise, the driver is considered to be operating a vehicle without the proper protections. Insurance can vary in its price range and the structure of the schedule of payments. The more comprehensive the coverage, the more expensive it will be. Payments are often made on a monthly basis, which needs to be considered in your budget for your vehicle. Even if the payments are made annually or twice a year, you may wish to put the money back on a monthly basis. This will save you from having to fork over a large amount of money in a singular payment and allow you to build up the capitol across a year or six months, whichever the case will be.
Not all insurance coverage is the same, as aforementioned, and not every insurance package is priced the same. While one provider offers a set price another may offer a lesser cost for the same amount of coverage. Those that are looking to spend the least amount on coverage should do their research. Calling insurance companies, researching bundling options, and understanding who provides the most amount of coverage for the lowest cost can save you tens of hundreds of dollars annually and across your monthly budget. You can find websites like Esurance that will help you compare varying rates to find the one that works for you.
Fuel Costs
Another necessary and expected cost that you will want to include in your budget is the price of fuel. Fuel costs continue to increase across the United States topping, exceeding the $3.50 per gallon mark on average. In a 2013 CNN Money article, it was asserted that current trends in the market will only drive upward the price of fuel per gallon. This cost can be crippling if it is not included in the vehicle budget. It estimated that the average American family spends upwards of four hundred dollars a month on gasoline alone. This puts a significant dent in a budget, especially if it is not prepared for.
The cost of fuel is a constant when it comes to operating a motor vehicle and should be included in the monthly vehicle budget. Households can guestimate based upon their own driving habits the amount they should budget. If this is still a bit too gray, there are several different fuel calculators available through manufacturers and the department of transportation. These, too, will be estimates based upon the input of information that you provide. However, they are backed by research and may be able to provide you with a more accurate picture when planning your finances for the month.
The Next Vehicle
In 2004, research suggested that the average American would have roughly twelve vehicles in their lifetime. Today, this number has dropped but is still above the eight car mark. For that reason, it is important to prepare for your next vehicle while budgeting for your current. This can help you to more easily make the transition when you must purchase a newer vehicle down the road. It can also be helpful to put money back and budget if you are looking to purchase an additional vehicle. Putting a bit aside each month and budgeting into a general vehicle fund can better prepare you for the transition to a new vehicle or an additional one when the need arises.
Conclusion
Vehicles cost money and there is no way around this fact. Not only in their initial purchase but in the months and years spent driving them, keeping a vehicle safe on the road can be a costly endeavor. But, knowing the aforementioned budgetary considerations can help you to stay on financial track while maintaining a vehicle. Consider these budgetary restrictions and items of focus but also understand that your personal financial outlook pertaining to a vehicle may differ slightly. Having a basic understanding, however, can help you to plan your vehicle budget a bit more successfully.
