Car purchases can be one of the most exciting, stressful, and expensive decisions we make in our lives. The day of your purchase is merely the beginning of the financial adventure that is car ownership. Whether you opt for a fuel efficient commuter car, truck to haul tools or a boat, or the sports car you always dreamed of, some basic knowledge will help you make an informed decision so you can plan accordingly.
1. Sales Tax, License, and Other Fees - The day of your purchase you may be shocked to learn that the price you land on for your new car may not include sales tax. The average sales tax in the United States is over 8% and the average sales price for a new car is over $30,000, which means that you can expect to pay approximately $2,500 on average when buying a new car. In addition, dealers typically tack on a variety of other fees you may not be expecting and only appear at the time of signing. The cost of registering a car varies by state but can be a shock to the uninitiated. It's also important to know that these fees are recurring every year and they can change as local law changes. Be prepared to pay hundreds of dollars to legally operate your car in your state every year.
2. Fuel Costs - We all know that the more we drive the more our gas costs skyrocket. One thing we don't always consider is that fuel costs can vary dramatically by car type. Premium fuel can cost fifty cents more per gallon, or five to ten dollars per fill up depending on the car. Taking a realistic look at car mileage and fuel costs is critical to understanding your expenses over the long term.
3. Insurance Costs - Most car purchases start with the car and tax, license, fees, and insurance come later. Unfortunately, insurance costs can vary wildly depending on the car type, miles driven, location, and the drivers profile. Understanding insurance costs is a prerequisite to the Wyse car selection process.
4. Maintenance and Repairs - All cars are not created equal. Quality doesn't just vary by brand, but can vary across a single model by year, location of manufacture, or design. Gathering information on reliability and quality for the cars you are considering can be the difference between tens of thousands of dollars over the life of a vehicle. Researching 5-year cost of ownership for the cars you are considering is a good place to begin your car-maintance education.
5. Depreciation - Depreciation is often one of the last things people consider when they purchase vehicles, but is one of the most costly. Unless you car is a collectors item it will undoubtably lose value over time. Understanding how long you plan to keep your car and what it will be worth when you decide to sell is an easy way to think about depreciation. Some cars have notoriously bad resale values, while others are coveted by the used car market and hold their value well. Even though depreciation doesn't feel like an expense in the same way as fuel or maintenance, the effect on your bottom line is the same.
6. Finance Costs - Unless you buy your car with cash, you will pay a lender for the privilege of borrowing their money. Whether leasing or buying, finance costs are an unavoidable part of buying a car. Shopping for the best rate with the best conditions can save you hundreds or thousands of dollars over the life of a loan.