You want a new car? You look at the ads, and you find that the advertised monthly payments are SO reasonable. Firstly, know that indeed, various automaker rebates make it more affordable than ever to buy a new car. That said, there are other expenses that need to be taken into account in order to understand how much your vehicle will actually cost you.
Just like a mortgage, you have to see the full picture before making a decision.
So, when calculating your car budget, there are several items you must consider. The first is the monthly payment, obviously. Then, there are other fixed costs like the cost of insurance (note that this price can vary greatly depending on the vehicle model and a prior estimate is always best), the license plate and your driving license. These costs come back every year, and they are fairly easy to predict.
Then there are the variable costs: the most important is the cost of fuel. If you drive 20,000 kilometers throughout the year, and your car consumes 8 liters per 100 kilometers, and if a liter is $ 1.10, you will need to put aside an amount of $ 1,760 per year. Most will agree that is not negligible.
Driving in the city will add additional costs including the price of parking (and tickets because we forgot to feed the parking meter), and then you have to take into account maintenance costs (oil change, etc.), and tire costs.
To calculate the latter, take the amount of new summer and winter tires, multiply it by every three years you want to keep the vehicle. To know the monthly cost, divide by the total number of years you plan to keep the vehicle times 12. This will give you a monthly amount which you can add to your planned expenses. Example: If you keep the vehicle five years, we will have to change the tires twice (winter and summer). The total cost of the tires is $ 1,600 (estimate) divided by 60 months = $ 27 monthly.
Finally, and unfortunately, you also need to include an amount for car repairs once the warranty is no longer in effect. This amount will vary greatly, and based on the reliability of your vehicle may be very little or very high. Have a look at the various forums and talk to other owners who can share their experiences. The idea here is to set aside an amount every month while the warranty is still in effect. If you set aside 50 $ per month from day one, you will have a good “emergency budget” when the warranty is over.
Thank you to South Centre Volkswagen for their help with this article.