Your 5-Minute Guide to Car Expenses

 

 

This article from MSN on car expenses was too good not to share…

 

Reposted from: http://articles.moneycentral.msn.com/SavingandDebt/SaveonaCar/Your5MinuteGuideToCarExpenses.aspx?page=all

 

Your 5-minute guide to car expenses

You'll spend more money on cars than just about anything except a house. Let these 31 tips steer you in the right direction to lower your car expenses.

[Related content: automotive, savings, cars, budgeting, auto insurance]

By MSN Money staff

The cost of a car is a lot more than the sum of its payments. It's the gas, the repairs, the insurance, the parking. It's the lost opportunity to do other things with your money as well.

Your homework should involve a lot more than a test drive. In fact, it starts with simply doing the math. Consider this: If you're 25 and buy a $20,000 car rather than a $30,000 one, and sock away that 10 grand in a Roth individual retirement account at 7%, you'll have $160,000 to retire on. (See MSN Money's Savings Calculator.)

And consider these points:

• One rule of thumb is that you should spend no more than 20% of your household income to buy and operate car.
  
• If you don't have a car payment now, consider whether you're willing and able to take one on. Try putting aside a car payment, say, $500, each month for three months and not touching it. Are you able to live easily without that money? Would you really rather do something else with it? (See "Keep your old clunker or buy a new car?")
  
• Have a realistic idea about the value of your trade-in. (You can find Kelley Blue Book values here.)
  
• If you owe money on your current car, rethink any plans to buy a new one if your loan is "upside down" -- if the car isn't worth what you owe. Rolling over debt is the fast track to real trouble. You'll pay higher interest rates because what you owe isn't secured by the new car itself. (See "The real reason you're broke.")
  
• Look further ahead than the monthly payment. Choosing a car that requires premium gasoline will cost you several hundred dollars more a year. Choosing a car equipped with summer-only tires could force you to buy another set for winter. Satellite radio? That'll cost $140 or so a year.
  
• Consider your credit. Loans for people with marginal credit have grown increasingly more expensive. A few months' work on your credit rating could pay off in a loan rate several points less expensive. (You can get an estimate of your credit scores here.)
  

 

If you decide to buy, there are still a few key steps before you leave the house:

• Get a feel for what's out there. (Check MSN Autos' 2010 model year review or used-car listings at AutoTrader.) Unless you're a gearhead or intensely brand-loyal, you should find several models to compare and test-drive rather than fixing on just one.
  
• Resist the urge to pay sticker price or more for a high-demand car. Demand -- and selling prices -- always fall. Remember the New Beetle and the PT Cruiser?
  
• Call your insurer for full-coverage rates on the cars you're considering. (You can compare the relative risk for theft, injury and collision repairs for different cars with MSN Money's Auto Risk tool.)
  
• Contact your local motor-vehicles department to see what registration and licensing would cost. You probably will roll the first year's costs into your loan, but the hit can be substantial in subsequent years in states with yearly fees based on the value of the car.
  
• Arrange financing. You can get an idea of rates here. You should apply with at least one bank or credit union. (If a bank won't lend you money for a car, you really shouldn't be buying one until your credit is repaired. A car dealer probably can find financing for you, but you will pay dearly for it.)
  
• Do a reality check. If you have little to no down payment, you are upside down the second you leave the dealer's lot. The longer the loan, the longer you'll stay trapped that way. Aim for 48 months; that way you can get a few payment-free years before the car begins to need major repairs -- and you'll have positive equity much more quickly. (See "10 steps to the best car loan")
  

 

Tricks of the trade

Will you trade your old car? Selling can be a hassle, and it's not always worth the trouble. But sometimes it is. Consider:

• Is your old car worth less than $5,000 or so and paid off? If so, sell it yourself. A new-car dealer wouldn't be generous (probably it would go to auction rather than stay on his lot), yet cars in that price range are a sweet spot for buyers who can't afford to finance -- and for smart folks who don't want to go into debt.
  
• Selling a car worth a substantial sum is more difficult. You can't offer the kind of financing and dickering room a dealer can. And selling a car on which you still owe money can be a lot of work. (See "How to sell a car you don't own.")
  
• A deciding factor on trade-ins may be your state's sales-tax policy. Some states tax only the difference between the sale price of the new car and the trade-in value of the old. In others, you pay sales tax on the full value of the new car. A $20,000 trade-in in Washington state, for example, would save a buyer at least $1,460 in sales tax.
  
• Remember that the value of your old car is what someone will pay to buy it, not necessarily what a dealer will give you in trade. If a dealer offers you $2,000 above Blue Book for your car, he's making up the difference elsewhere.
  

In the hot seat

• If you have arranged financing in advance, you can drive a harder bargain or simply walk away. If a dealer can offer a better deal, great, but you won't be compelled to buy at the only place that would finance you.
  
• If you hate to haggle, you can try either a no-haggle dealership or a service that does the haggling for you.
  
• Buy a car, not a payment. Negotiate the total price of the car. (Use the chart below as a rule of thumb to figure payments.) When the salesman asks about monthly payments, say, "I'm more interested in the price of the car right now."
  

 

Estimate your payments as you shop

Here's what you'll pay for each $1,000 you borrow:

At 0.0% APR*	At 2.9% APR	At 5.9% APR
$41.66 for 24 months	$42.94 for 24 months	$44.28 for 24 months
$27.78 for 36 months	$29.04 for 36 months	$30.38 for 36 months
$20.83 for 48 months	$22.09 for 48 months	$23.44 for 48 months
$16.67 for 60 months	$17.92 for 60 months	$19.29 for 60 months
$13.89 for 72 months	$15.15 for 72 months	$16.53 for 72 months
At 0.9% APR	At 3.9% APR	At 6.9% APR
$42.06 for 24 months	$43.38 for 24 months	$44.73 for 24 months
$28.16 for 36 months	$29.48 for 36 months	$30.83 for 36 months
$21.22 for 48 months	$22.53 for 48 months	$23.90 for 48 months
$17.05 for 60 months	$18.37 for 60 months	$19.75 for 60 months
$14.27 for 72 months	$15.60 for 72 months	$17.00 for 72 months
At 1.9% APR	At 4.9% APR	At 7.9% APR
$42.50 for 24 months	$43.83 for 24 months	$45.18 for 24 months
$28.60 for 36 months	$29.93 for 36 months	$31.29 for 36 months
$21.65 for 48 months	$22.98 for 48 months	$24.37 for 48 months
$17.48 for 60 months	$18.83 for 60 months	$20.23 for 60 months
$14.71 for 72 months	$16.06 for 72 months	$17.48 for 72 months

*Annual percentage rate

• Leasing is just another method of financing. It could make sense if you like to trade every two or three years and don't drive a lot. Negotiate the cost of the car first. Put as little down as possible; gap insurance on leases won't repay any "capital reduction" if you total the car. (See "A $199-a-month car isn't always a deal.")
  

 

Fill 'er up . . . gulp

While gas prices have fallen from their 2008 highs, it's still expensive to gas up, and there's no quick fix. But there are some things you can do to ease the pain at the pump:

• Consume less, either by choosing fuel-efficient models or ditching a car altogether. Look for a car no bigger than you can use regularly (and rent a pickup when you need to go to Lowe's). (See "Is the car-free life for you?" and MSN Autos' Green Vehicle Center.)
  
• Plan your trips. That means not just combining errands but also planning your route to avoid left turns, for example. Also avoid idling in the drive-through.
  
• Forget premium gas. Buy the cheapest gasoline that doesn't make your car engine knock. See "10 things gas stations won't tell you.")
  
• Compare fuel prices on Internet sites that track them, such as GasBuddy.com and GasPriceWatch.com.
  
• Text messages about low prices also are available. If your phone supports sending a text message to an e-mail address, get prices from gas@gasbuddy.com or gas@fuelgo.com. For up-to-date delivery to your desktop, MSN Autos offers a downloadable program that grabs gas-price data.
  
• In general, the nicer the neighborhood, the more you'll pay for gas because station owners' overhead is higher. So stop in a less-expensive part of town to fuel up. However, it's rarely worth it to drive around looking for cheaper gas.
  
• Try not to drive with a cold engine, don't carry things on top of your vehicle, slow down, and avoid hard acceleration and braking. (See "Fuel-saving driving tips.")
  

 

Squeeze out more savings

Whether driving a new car or the old one, we're all looking for ways to save money. Here are more ideas:

• Consider car pools or shared car arrangements at least part of the time.
  
• Never skimp on maintenance, especially those things that cost a fortune if they break. Get regular oil changes, tire rotations, tuneups and transmission checks. With regular maintenance, today's cars can go 200,000 miles or more. (See "Cars that last a million miles.")
  
• Keep a record of repairs. With a log and the receipts, you'll know who did the work and when and whether there's a warranty. (See "20 ways you waste money on your car.")
  
• Consider dropping comprehensive and collision coverage if you own your vehicle outright and the combined annual cost for that coverage is more than 10% of what you would get if you car were totaled. (See "Dump the insurance on your clunker" and "Your 5-minute guide to car insurance.")
  

 

Updated April 22, 2010

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