Buying a car is a major expense. Because the vast majority of drivers finance their vehicle with an auto loan and do not pay the full price for their car upfront, many drivers do not know how much money they should plan on spending on their next vehicle purchase. In order to create a practical budget for your next vehicle purchase and stay within that budget, it is important to understand and consider all of the costs involved with owning a car. We hope to give you some sound car shopping tips to help make sure you get into the best vehicle for your situation.

Keep reading to learn more about the major costs associated with owning a car—including and beyond its initial purchase price—to help you determine how much money you should plan on spending on a car to keep your next vehicle and its associated costs comfortably within your budget. 

Down Payment 

How much should you spend on your car?

How much should you spend on your car?

The purchase price of your vehicle is of course the biggest one-time expense that is associated with buying and owning a car. The current average down payment on an auto loan is just under 12% of the total purchase price of the vehicle. 

However, this does not mean that you should plan on paying only 12% of the cost of your next vehicle upfront. The more money you put toward a down payment on your vehicle, the less money you’ll have to pay in monthly payments, and the faster you’ll be able to pay off the cost of your vehicle in full. Experts suggest that car buyers should try to pay a down payment of about 20% in order to minimize their interest rates, monthly payments, and auto loan length. 

Monthly Payments 

Most drivers who do not pay for their vehicle in its entirety upfront—which encompasses the vast majority of drivers—pay monthly payments in order to pay off the initial purchase price of their vehicle over time with interest. 

The initial purchase price of your vehicle and the terms of your auto loan will determine how much money you pay per month in monthly payments for your car. It is important to remember that lower monthly payments don’t necessarily mean you will end up paying the least amount of money over time. If your monthly payments are lower and your loan length is longer, you’ll end up paying a significant amount of money in interest in the long run. 

When searching for a lender for your auto loan, visit multiple institutions—banks and credit unions in addition to car dealerships—and try to secure a loan that includes low-interest rates as well as monthly payments that are within your budget. 

Insurance Costs 

Our car shopping tips wouldn’t be complete without talking about car insurance. Insuring your vehicle is another major expense that goes along with owning a car. The average cost of auto insurance is between $125 and $150 per month, which adds up to about $1500 to $1800 per year. 

However, auto insurance depends on a wide variety of factors. It is important to determine what your monthly auto insurance costs will be and factor that into your monthly budget before purchasing your next vehicle. 

Maintenance and Repair Costs 

Maintenance and repair costs can come out of nowhere, and they can add up to a significant amount throughout the lifetime of your vehicle. Before you buy your next vehicle, consider the money you will have to pay to maintain and repair it over time before deciding whether you can afford that vehicle. 

Keep in mind that maintenance and repair costs vary significantly depending on the vehicle you buy. For example, luxury vehicles with foreign parts tend to be more expensive to maintain and repair. On the other hand, vehicles that are known to be very reliable cost much less to maintain and repair because they are less likely to break down and require major repairs and part replacements beyond general maintenance services. 

Fuel Costs 

The cost of fuel for your vehicle is a pretty significant regular expense, and it is one that can fluctuate to a great degree depending on which type of vehicle and vehicle model you choose to purchase. 

For example, a traditional gas-powered vehicle that gets about 25 MPG costs about $1,600 per year to fill up with gas. On the other hand, a hybrid vehicle that gets approximately 40 MPG costs less than $1,000 per year to fuel. This means that you can save yourself more than $600 per year in fuel costs if you purchase a fuel-efficient car—and even more, if you opt for an all-electric vehicle instead of a traditional or hybrid car.

With these car shopping tips in mind, head over to the AutoPlex today and see our specials.