There’s a lot to think about when you decide it’s time to start planning for a new car. If you want to finance or buy outright, purchase or lease, or get a new or used car can all play a role in the final price you’ll end up paying.
Creating a budget for your car
When you budget for a car, you should try to keep the total cost of your vehicle to 15% or less of your after-tax, monthly income. You’ll want that 15% to include monthly payments, gas, maintenance, and insurance. If you get an electric car you won’t pay for gas, but you’ll need to keep in mind the cost of electricity and the electric vehicle supply equipment needed for charging.
It’s easy to get caught up planning for your down payment or monthly dues, but there’re other fees you’ll need to plan for when you decide to get a car. These fees can add up, so make sure you’re prepared for these additional costs when you’re buying a car.
Common fees for buying a car
- Vehicle registration. You’ll need this before you can legally drive your car on public roads. The registration is issued by your state’s agency and shows that you’re responsible for the vehicle.
- Insurance. Car insurance is required by almost every US state, and the type of coverage you'll need depends on where you live. Most states require you to have some form of coverage for injury and property damage.
- Taxes. Your car, like any other purchase, will be subject to your state’s sales tax. For states that charge it, you’ll need to pay the sales tax upfront whether you’re leasing, financing, or buying outright.
- Warranties. New cars usually come with a manufacturer’s warranty free of charge. This warranty lasts for a certain length of time or number of miles and covers problems with your car. You might get an offer to buy an extended warranty to cover problems with your car after the manufacturer's warranty expires.
- Upgrades. Buying a new car might give you the choice to add-on special features for a fee. These can include any upgrades, like anti-theft or vehicle tracking devices.