At an event recently someone at our table made a comment about dreading the day she would need to replace her car. There were others at the table who agreed. Your car purchase is one of the larger purchases in most of our lives and something most of us need.
When looking for a car it is important to think about what kind of vehicle you need and how it will be used. For example, if you are single or have a small family is it necessary to have a huge SUV? Also, consider how much you drive. If you have a long commute to work, etc each day consider looking at a vehicle with good gas mileage.
Along with the cost of the vehicle, monthly payments if you need to borrow other costs to think about are registration costs, maintenance, insurance costs and gas expenses.
Even though it is usually a large expense, if you plan for it and save a certain amount each month, you may be able to pay for it or a major part of it without the added cost of interest expenses. If you do borrow, once you pay it off try to continue driving it for awhile before buying something newer. Once you have paid it off, put the amount you had been spending on monthly payments in a savings account to put towards a different vehicle when you need one.
Another thing to watch out for is buying a different vehicle when you still have a loan on the one you are presently driving. Car dealerships are more than happy to roll your current loan into your new one, but for you it isn’t such a good deal.
Practical Money Skills has a variety of calculators on different topics. One area is autos, one shows you how much you can afford to spend on a vehicle and how long it will take you to pay off your loan. Other areas covered are mortgage costs, credit card debt, household and family expenses.