Owning a Vehicle: Know the True Cost

When it’s time to purchase a vehicle, whether new or used, it’s important to pay attention to more than the purchase price. Of course, that’s the primary expense, so let’s first take a look at the monthly car payment. According to Experian, for 2017, the average payment for new vehicles is $506 and $364 for used vehicles. Whether new or used, car payments vary based on your credit. If you’re going to purchase a car soon, you’ll benefit if you pre-qualify for a car loan before visiting the dealership.

AAA has been studying the total cost of car ownership since 1950. According to the organization’s 2017 study, it costs nearly $8,500 annually, or just over $700 monthly, to own and operate a new vehicle beyond the actual purchase price. For new vehicles, AAA accounts for fixed costs such as finance charges, insurance, depreciation, as well as the variable costs of fuel and maintenance. Used vehicles incur additional expenses too.

If you’ve purchased a new car, you’ll want to consider depreciation. Unfortunately, you’ll lose an average of $15,000 in value over the first five years according to AAA. Some vehicles depreciate more quickly than others. If maintaining value is important to you, possibly a small sedan or small SUV is best, both depreciate more slowly than other vehicles. Not surprisingly, electric vehicles depreciate at the quickest pace, followed by minivans.

As for the annual variable costs of car ownership, the largest this year is fuel. This expense varies greatly depending on the type of vehicle and gas. AAA derived a standard, determining Americans spent, on average, $1,500 to fill their tanks.

We also look to AAA for average maintenance and repair costs per year, which is $1,186 for 2017. This figure includes regular maintenance such as oil changes and replacement parts like new lights, batteries, and tires in addition to more complicated repairs.

Regarding used cars, the purchase price, and therefore loan value, will decrease compared to a new vehicle. Insurance and depreciation costs will be lower with used vehicles as well. Maintenance costs may be higher, however, in the end, you can save substantially by buying a used vehicle.

Thinking of buying soon? Visit Advantageautoloans.com and use the convenient tools to discover your possible car payment. Be informed before going to the dealership and get the offer you deserve.

Note – There may be minimal monthly cost overlap of finance charges. This charge was factored into both Experian and AAA studies.

Buying a Car Without a Down Payment

So you need to buy a car, but you lack the funds for the down payment? This is a tough situation and to make it more difficult, your credit isn’t the best. It may seem the only thing you can do is pay a high interest rate – the rate you want to avoid. But wait…there’s hope – there may be another option.

The Smallest of  Down Payments  
In the past it was standard to put down 20% on a vehicle; these days many dealerships will take half that and sometimes, even less. If you can put down anything it will help lower your payment. However, if even the smallest down payment isn’t doable for you, there are car dealers and finance companies that will fully finance your loan at over 100%, to account for fees, but as you may have guessed, it’s going to cost you more every month at the highest interest rate.

If you can wait a few months to make your purchase and save for a modest down payment, the wait will literally pay off. Also during this time, strive to pay all bills on time and correct any potential issues on your credit report. A cleaner credit report should reduce your interest rate and therefore your monthly payment.

Do Your Homework  
Don’t be afraid to negotiate. If you have a deal in mind, you won’t get it if you don’t ask. Talk to dealerships, not only about the price of the car, but also about financing options. Again, you never know what they can do until you ask. Do your research – there are online tools that will prepare you before you visit a dealership or reach out to banks, credit unions and specialty finance companies. Take a few minutes and check out a Payment Calculator, Car Loan Calculator, and Income Calculator. Get familiar with the range of interest rates so you get the best deal. Don’t pay more than you should!