As a part of the budgeting process, the funds you typically need to save up for a variety of expenses each year can be quite high. One of the areas that is often included in this budget is the money you will need to pay towards a vehicle, whether that be your current car or as you prepare to buy a new one.
We have been seriously thinking about buying a new car for a while now and want to start our search this fall. With that being said we want to save enough money to help us with this purchase, and therefore we will have to keep on track with our budget, if we want to have our new car out on the road before the winter arrives.
For us, we will certainly be looking to get the necessary financing for our new car and even though we are not paying full price for the vehicle outright, we are also aware of the costs associated with purchasing a car through this method. Together let’s take a look at some of these expenses – so we are both aware of what exactly we need to budget for.
Down Payment & Monthly Payments
Two important areas where ongoing budgeting skills will factor in during vehicle financing are the down payment amount and the monthly payments. Taking some time to save a sizeable amount of money that can be put towards the down payment will help you quite significantly as you begin the car loan process. The larger the amount of money you can use as a down payment can help you reduce your total loan size as well as even allowing for lower monthly payments. Additionally, you will want to figure out how much of a monthly payment you can afford and incorporate this into your budget. Understanding that these payments are likely to go one for the next several years.
To help you determine how much these payments will cost, to help you negotiate and how much of a down payment you will need to make, you will also want to look at the qualities you are looking for in a vehicle and this can start with determining the purpose the vehicle will serve in your life and lives of your family.
For our family, we will need a vehicle that is a decent size – a van or a sports utility vehicle, perhaps – and one that will accommodate my husband, myself and our two small children. We also want a vehicle that will handle all types of weather conditions, as well as one that will be easy to handle, provide comfort and also safety.
There are many interior and exterior features that will be necessities and others that will fall under the bonus and luxury categories. While some features that are considered ‘safety’ additions, such as back up cameras, anti-lock breaks, remote entry and darkness-detecting lights – these may be additions we will consider once we establish how much we can afford. As you can see there are many, many decisions to make that are personal to your lifestyle needs and wants. These choices will greatly impact the price of the vehicle in many cases and so you will want to adequately weigh the pros and cons of which features you need and which ones you can manage without.
Additional Costs of Car Ownership
You will also want to factor in all of the additional costs that you will need to pay towards your vehicle upfront, as well as each year. As you plan your budget for this upcoming purchase, you will need to keep these other expenses in mind each year over your vehicle’s lifespan. As we design our budget for our new car, we will also be thinking about the following expenses:
• Insurance – purchasing car insurance is a must in order for us to operate our vehicle and we will need to determine how much we are likely to pay on an ongoing basis. The type of vehicle, in combination with other specific factors, such as driver’s age and driving history will also impact this expense.
• Fuel – how much will we need to budget for gas, each week and each month will be an important consideration. Depending on how much you drive your car each week/month, will determine how much you’ll expect to pay at the pump. Gas prices are also not likely to go down anytime soon and since we will be driving the car quite often this leads me to the conclusion that we should consider vehicles that have a good fuel-efficiency rating.
• Maintenance/Repairs – servicing and vehicle repairs are also an inevitably of car ownership and this ongoing vehicle expense will of course need to be penciled in to your budget. Not only can regular servicing help to keep your car from encountering serious issues down the road, it can also help you prolong the life of your vehicle with great success. As a result, this will be an area that we will be certain to find a spot for in our fall budget.
Ultimately, our goal here is to find a new car that is both reliable and safe for our family. Being aware of everything we will need to consider as we re-evaluate our ‘new vehicle budget’ will help us as we approach the car-buying process this fall.
Remembering to factor in the expenses associated with the purchasing process as well as the more long-term costs are equally important components of any comprehensive budget and with such a large financial purchase on our horizon, what we really want to do is be as organized and prepared as possible for a commitment of this size.