Calculating Used Car Ownership Costs
One of the first things to consider before buying a used car is what it will cost. Beyond the price you'll pay to take possession of the car (or the monthly payment'”if you finance the purchase), there are a number of other expenditures you'll need to be aware of to make sure your car doesn't own you. Most of the expenses can be planned for'”others will pop up, typically at the least opportune moment. If they haven't been prepared for in advance, they could well land you in a vulnerable financial position.
Unexpected Expenses: To prepare for unexpected expenses with your used car, it's always a good idea to sock away some dough every month in anticipation of the unexpected. Most experts recommend saving anywhere from $50 to $100 a month, so that if the transmission falls out of the car at some point, you'll have money set aside to deal with it.
If you buy a certified pre-owned used car, repair expenses will be moot while the car is still under warranty. Thus, putting a little away every month, for the day when the warranty goes away, will put you that much farther ahead of the game. Similarly, taking your time and finding the best example you can find of the car you want to drive will go a long way toward staving off unexpected repairs.
Planned Expenses
Planned expenses include fuel, preventive maintenance, registration and insurance.
Fuel Costs: These days, with fuel hovering in the four dollar a gallon range, you'll want to pay particular attention to the EPA's fuel economy ratings for the car you're considering. To get an idea of how much you'll pay for gas every month, take the distance between your job and your home, multiply that number by two and multiply the result by five. This will be the total number of miles you'll drive back and forth to work weekly. If you live 20 miles away from your job, that's 40 miles a day, times five days, is 200 miles a week. Fuel economy ratings can be found at FuelEconomy.gov. If the car you're considering averages 20 miles per gallon, you'll buy 10 gallons of gas a week to get to work, and you'll spend $160 monthly at four dollars a gallon. Keep in mind that's just to go work. You'll need to factor in another 15 to 25 percent for shopping and recreation.
Preventive Maintenance: Oil changes, preventive maintenance and tires can be figured based on information in the owner's manual. To find out how much each maintenance service will cost, contact a dealer's service department, or an independent mechanic who specializes in the car you're considering. These costs will also vary depending upon how much you drive, but the same formula we used to determine fuel costs is effective for determining maintenance costs as well. The manual will tell you what maintenance procedures to expect at various stages in the car's life. Take the odometer reading of your car to see where it is in the maintenance cycle, factor in the number miles you drive to work and start getting your estimates from there.
Registration Fees: Fees vary state by state as well as the associated costs of making sure your car qualifies for registration. To figure these costs, consult your state's DMV.
Insurance: In nearly every state, some form of insurance is absolutely mandatory. With a used car, you'll pay less, but you will pay. You'll want to get insurance quotes for the car you have in mind before you get the car. Imagine getting the car of your dreams only to learn you can't afford to insure it.
As you can see, there's a lot more to affording a car than being able to cover the monthly payments. By taking a look at the associated expenses before you buy, you can make sure you'll get a car you can comfortably enjoy.