New car sales in Australia have gone up by 2 percent. This proves one thing: the need for vehicles. In this context, everyone agrees on this: buying a car is a considerable investment. Although it is exciting to picture yourself driving a new and polished car, it’s best if you don’t get ahead of yourself. Taking into consideration only the cost of the vehicle isn’t enough. You should consider the extra expenses as well.
So, what are the real costs of buying your first car? What should you know before you go down this path?
Loan repayments, insurance costs, taxes and maintenance expenses are only some of the things that shouldn’t be overlooked.
Did you know that?
- 6 percent of Aussies choose their car based on how it looks?
- 24 percent of Australians consider that the vehicle they drive reflects their lifestyle?
Establishing the Total Price
First things first: the full cost of an automobile is more than the sticker price. Expenses such as sales tax, registration fees, insurance are to be considered. So, bear this in mind and ensure you leave yourself some wiggle room when you’re on the lookout for a new vehicle.
Also, regular maintenance, repairs, gas, and other costs linked to car ownership shouldn’t be forgotten.
- Among the taxes you are required to pay there is stamp duty, a legal fee levied on the greater majority of legal documents. A yearly tax is imposed as well, which is estimated based on a combination of factors including the state where you live and the type of vehicle you drive.
- Compulsory third-party insurance, for instance, is also imposed. Additionally, you might consider getting insurance for fire and theft as well, for the extra price, of course.
- One thing that you shouldn’t forget is that a car is, by definition, a depreciating asset. So, if you have the sum to purchase a car, that doesn’t necessarily mean you should go for it. You must ensure that it fits your specific needs first.
Assessing Monthly Payments
If you’re considering to take a car loan, it’s mandatory to calculate your ideal monthly payments. The term of the loan, the interest rate and the amount of down payment will directly affect your monthly payment.
If you wish to be frugal about your investment, you should devote approximately 10 percent of your total income towards your car. In other words, if you earn $3,000 a month, you should direct about $300 per month for your vehicle. Our personal recommendation, however, would be to reduce this if you already have debt. Shopping at the very top of your budget isn’t a sensible practice, from a financial point of view.