On this episode of Cope'ing with Money, we're going to be talking about the real price and the real cost of buying a car.
What's up, everybody? It's your boy, Brandon Copeland, aka Professor Cope, and you are now tuned in to another special episode of Cope'ing With Money.
SEE MORE The "Real" Cost of Buying a Home
We've all heard that buying a car is a game, and we've got to learn how to play it. There's 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 point, that's still not the full price you're going to pay.
So today, we're talking about all those additional fees and breaking down the real cost of buying a car.
The Real Cost of Buying a Car
Check the Term of Your Loan
First and foremost, 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 add up 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 also mean you'll be paying a lot more in interest over the life of the loan. Plus, if you're buying used or you plan to upgrade your vehicle in just a couple of years, a long-term loan might even outlive the life of your car.
Try sticking to a five-year loan for buying a new car and a three-year loan for buying 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 car's monthly payment, you'll also be paying sales tax on it up front, which will vary depending on the state you're purchasing in. You can expect anywhere between 2% and 8%, so make sure you're researching your state's tax rate. If the price is right, you may even consider purchasing out of state.
On top of this, don't forget about your state's registration fees. These are typically at a fixed rate and will be the same regardless of the car you drive. But make sure you're double checking for your location and factoring these into the final cost.
Consider Your Insurance Premiums
The next thing we have to consider are our insurance premiums. This is a big one because insurance costs make up a pretty significant portion of the total price of buying a car and they are dependent on a wide variety of factors.
The cost of your premium is affected by your age, where and how much you drive, your deductibles, your accident history, as well as the make, model and the price of your car. That expensive red sports car might look nicer than the beat-up station wagon, but it's also going to cost a lot more to insure.
Once you know the car you're planning 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 pick an insurance provider that suits your needs.
Make sure you get all the discounts you're entitled to. Discounts for safety features are automatically applied to your rate, but discounts connected to a student driver or safe driving habits might not be, so be sure to ask before locking in a rate with a new insurance provider.
Think About Fuel Economy
Next, let's talk about fuel economy, especially in a macroeconomic environment like today.
Is your car a gas guzzler, or does it make those miles count? Try to find a good balance between the features of your car and how long you'll be able to go without filling the tank again. And remember that if you commute or you've got a road trip coming up, you'll begin to feel the effects of your mileage almost immediately.
You might also look into a hybrid or electric car. These may cost more to purchase but could likely save money on operating costs over the long haul. You may even receive a tax credit for driving an electric car, so do your research prior to stepping into the dealership.
Factor in Cost of Maintenance
And lastly, we have to factor in maintenance costs to our overall vehicle purchase price.
It's not just the cost to buy our car, but it's also the cost to own it. If you're buying your car, remember that used cars may be cheaper up front but could require more maintenance in return; whereas new cars will run you a higher price but should run for longer without needing to be looked at.
When leasing a car, find out how much is covered by your warranty and how much comes out of your own pocket. Also, you need to check for manufacturer maintenance requirements, which may limit the way your car can actually be serviced or the places you can actually have service done.
If you're worried about regular maintenance costs, consider buying 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 that you will make multiple times in your lifetime. There are so many factors that contribute to the final price of your car, which can change either very slightly or by pretty 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 on Cope'ing with Money. Peace.