Time to pick out a car for yourself or a family member? You’re probably feeling both excited and a bit nervous. After all, it’s one of life’s biggest purchases and a decision you’ll be probably be living with for a while.
But you can’t start the search until you know how much you can afford to spend – not just on the car payment but on all the things that go along with owning a vehicle. Those can add up quickly. According to AAA, it cost an average of $9,561 a year ($797 a month) to own a car in 2020.1
Out three-step plan will help you get a handle on car-related costs and how to stay on top of them.
Step 1: Figure out what owning a car will really cost.
Cars can be expensive. Check out the list below, then use the budgeting and goal-setting tools on Summit’s Climbr® to prepare.
Insurance. Insurance is a must and it pays to understand your options. Things like the type of vehicle, your payment schedule (say, monthly vs. annually), and the amount of your deductible (emergency savings could let you opt for a higher deductible and a lower premium) could all impact your insurance costs. Get more than one quote and make sure you’re comparing apples to apples: “cheaper” coverage could end up costing you.
Registration. Vehicle registration can run to hundreds of dollars a year depending on where you live.
Fuel. Gas prices have been relatively low for years but they’re starting to tick up again. If you have a long commute or do a lot of traveling, fuel costs could add up quickly.
Repairs and maintenance. A newer vehicle will cost you more in payments but (probably) less in repairs, especially if it’s still under warranty. And all cars will need tires and routine maintenance (though completely electric cars don’t need oil changes!).
Tolls and parking. Does your commute include tolls? And do you have to pay for parking where you live and/or work?
Car payment. How much car can you afford? Find out in just minutes with Summit’s free, fast online pre-approval. Or, sit down with Summit’s lending experts (see Step 3 below) so they can walk you through your financing options and help you figure out the payment that’s the best fit.
Step 2: Plan ahead.
Once you have a rough idea of what it will cost you to own a vehicle, start saving – for the vehicle itself and the costs that go with it. Automatic deposits (right from your paycheck to your savings account) make it easy.
Step 3: Use Summit’s Auto Resources.
This handy auto resource includes everything from online tools to on-staff experts who can help you with every stage of the research and buying process. Check it out!
Follow our three-step plan and you’ll be on your way to owning your car in no time. Good luck!
Smart money tips brought to you by Red SHOES, Summit’s exclusive financial wellness program.
1 AAA “Your Driving Costs” https://newsroom.aaa.com/auto/your-driving-costs/
