Before Buying that Dream Car, Budget for the Lifetime Costs

Coming up with a car budget is an important part of the process of buying a car. When you want to purchase your dream car, you might save up for years. While this is a good idea, you will want to be aware of the lifetime costs of the car as well. Here are a few things to consider about the lifetime costs of your dream car before making the purchase.

Lifetime Costs

The principle of lifetime costs is quite simple. The term lifetime costs means the entire cost to purchase and own a car over the car's lifespan. When you purchase a car, you can easily find out the sticker price of the car. You can look online or go to the dealer and get the total purchase price. This is valuable information to understand, however, it does not tell you the lifetime costs. In order to know the lifetime costs, you will have to add up the purchase price of the car as well as all of the money that it costs you to maintain the car over the years. Here are a few common things that you will want to include in the lifetime costs.

Depreciation

The largest cost that you will want to consider in a car's lifetime costs is the depreciation. Cars depreciate at different rates over their lifespan. Some cars hold their value very well, while other cars depreciate greatly in a very short period of time. Before you buy a car, you will need to look at how the model and brand and examine if it holds its value over the long term. This will give you an idea of how much to figure for depreciation.

Fuel Costs

Another big factor in the car's lifetime costs is the fuel that you will purchase for it. The better fuel efficiency the car has, the less you will have to contribute to buying fuel over that time span. 

Insurance

Each car has its own insurance rate costs. The more dangerous the car is, the higher the insurance is going to be. For example, if your dream car is a very fast sports car, you are going to have to pay a high premium for your auto insurance. 

Interest

The interest rate that you get on the loan is another big factor. Different dealers have different promotions on their financing and you will need to account for this. 

Maintenance

The reliability of the car is another factor to look at. If you are buying a car that requires a lot of maintenance and repair, this is going to add to the lifetime costs.

Example

When consider how big of an impact lifetime costs can have, it helps to see an example. Let's say that you wanted to try and save a little money on the purchase of a car so you buy a Mitsubishi for $17,000 instead of a $20,000 Toyota. By the time you add in maintenance, fuel efficiency, insurance, and interest you will pay another $8000 for the Mitsubishi. The Toyota will only take another $4000. Therefore, you just spent $25,000 for the Mitsubishi as opposed to $24,000 for the Toyota.

blog comments powered by Disqus