What should you include in your car budget?
Buying a new car comes with all sorts of different expenses, ranging from the initial purchase price and car loan all the way through to maintenance, petrol and other upkeep costs. Keeping track of all of these things can make creating an effective car budget tricky. Fortunately, it’s possible to keep the entire process simple by breaking down your repayments into a few key sections.
In this article, we’ll be exploring each of these categories, as well as how to ensure your overall budget is as low as possible.
1. Upfront costs.
While some buyers will be able to purchase their car outright, many utilise a car loan to stagger repayments and spread out the total cost. When selecting a loan, it’s important to consider how your ongoing budget will be structured, in order to ensure your cash flow is appropriate for your repayment obligations. For example, you’ll need to decide whether you’ll be making repayments weekly, fortnightly or monthly, as well as the total repayment term. It can also be a good idea to look for a car loan with no fees, in order to keep initial costs down, although this may affect the overall interest rate that you’re able to secure.
In addition to the purchase price, another cost associated with a new vehicle is stamp duty, which is a form of tax. This can vary from state to state. In some states, stamp duty is calculated based on your purchase price, while in others the tax is calculated from the vehicle’s total market value. These differences can lead to significant fluctuations in total stamp duty cost, so it’s important to understand exactly how much you’ll need to pay, and factor that into your upfront costs.
2. Ongoing costs.
Along with making car loan repayments, there are other ongoing costs to consider. The most obvious one here is petrol, which can vary wildly depending on the type of car that you buy. If you’re looking to keep your overall budget as low as possible, it’s important to do your research and invest in a vehicle that offers great fuel efficiency.
Aside from petrol, other ongoing costs that should be considered are car insurance and regular servicing. While Compulsory Third Party (CTP) insurance is a legal requirement, many drivers prefer additional layers of protection, such as Comprehensive Car Insurance. How often you’ll need to service your car will depend on its age and reliability, but in general, you should expect to book a service every six to twelve months.
3. Unexpected costs.
Last but certainly not least, is a buffer in your budget for any unexpected car costs that may crop up. These issues could be everything from repairing a small mark or bump all the way through to needing an oil change. Having a set amount of cash in place for these situations will ensure you don’t end up blowing your budget. A buffer for unexpected situations is particularly useful if you’ve purchased a second-hand car, as issues such as needing to replace the fan belt are far more likely to crop up without warning.
By creating a smart car budget that takes these factors into account, it’s far more likely that you’ll be able to manage your vehicle’s costs effectively over the long term. To find out more, contact the Beyond Bank team today.