Owning a car can mean freedom, but it also comes with many responsibilities. We’re here to help before you get behind the wheel or sign on the dotted line. The following is vital information you should know before you venture into your car-buying dreams.
You Have to Budget
Car budgeting is essential. According to AAA, the average annual cost of owning and operating a new vehicle is $9,666, including depreciation (loss of value), fuel, insurance, license/registration/taxes, maintenance and repairs.
Invetopedia.com – How Much Should I Spend on a Car (2022) recommends spending at most 15% to 20% of your monthly income on all car-related expenses.
If you want to buy or lease a car in the future, you should start saving for it as soon as possible. The more money you save, the less you have to borrow or pay in interest. You should set a realistic goal based on the price of the car you want and how much you can afford to pay monthly.
Consider creating a savings plan based on your income, expenses, and time frame. You could also open a separate savings account for your car fund and automate your deposits. You could look for ways to increase your income and reduce expenses to help boost your savings. You should also track your progress and celebrate your milestones.
A high-yield savings account could also help maximize returns and pay 10 to 12 times the national average compared to a standard savings account. MoneyLion offers a convenient marketplace to compare high-yield savings accounts that could help you get started on your way towards buying a new car.
Repairs Can be Pricey
According to AAA, the average maintenance cost of a car comes in at $1,342 annually. This includes routine services like oil changes, tire rotations, brake pads, and filters. You might be able to save money by following the manufacturer’s service schedule, using quality parts and fluids, and finding a trustworthy mechanic.
Car Insurance Can be Tricky
How to get insurance to pay for car repairs can be a daunting question. But fear not; it is possible to get your insurance company to pay up. It all depends on your coverage, the cause, and extent of the damage, and who’s at fault. You should review your policy carefully and report the incident to your insurer as soon as possible. You may need to provide proof of the damage and get estimates from reputable shops. Reminder to all the parents out there: car insurance for teens is significantly pricier.
How Much is Car Insurance For Teens?
Expensive. The average cost of car insurance for teens is $4,472 per year for full coverage and $2,469 per year for minimum coverage, according to The Zebra. As a parent, you could lower the costs by getting your teen to take a driver’s course or adding them to your insurance. Sign up for Driver Score on the MoneyLion app and learn more about saving on car insurance.
What Happens When Your Car is Repossessed?
If you finance or lease your car and miss your payments, your lender can take back your car. This could ruin your credit score, making it harder to get another car loan or lease in the future. Car repossession is not fun.
A lot of serious business goes into buying and insuring a car, but as my high school coach would say, keep it clean and remember to have fun.