Unless you own a boat, it is likely that your car is the most profitable property after your house. This is a major expense that most people can not avoid because unless you live in one of the few big cities with excellent public transport or carpooling services, you have need your car to move.
Most Americans finance a car because few of them have the money to pay for such a large purchase. This payment – which usually includes fairly large interest – is only a part of the monthly expenditure on owning a car.
In most cases, people also have insurance (some states do not require it), maintenance costs, gasoline and maybe parking fees depending on their place of residence . The numbers tend to accumulate fairly quickly, but many people do not really consider the total cost of buying a car.
What does the average American spend?
The average American spends $ 653 a month on car payments and car expenses, according to a survey of 2,000 US adults for The Zebra, an insurance comparison tool. It costs $ 7,836 a year to own a car and keep it on the road.
To put this in perspective, the average American earns $ 46,800 a year, according to data from the Bureau of Labor Statistics. This means that car expenses absorb 17% of the average employee's total income.
Of course, it is possible to spend a lot less. In fact, it is probably more sensible that most Americans spend well below this number, but this requires making informed decisions.
How to save on a car
When buying a car, it's important to strike a balance between profitability and reliability. Buying a new car is almost never a good value because cars depreciate by 20% per second when you drive them. Imagine buying an action that loses 20% of its guaranteed value once you buy it, with a guarantee that it's worth less as time passes.
You want to be on the safe side of depreciation and, in general, that means buying a car for a year or maybe a little older. This is usually the ideal place to get something in good shape if someone else is experiencing the repercussion.
Before buying a car, you should also do your homework. Some vehicles have lower average needs and / or repair costs. Others cost more, even for a simple emptying.
Use resources like Consumer reports& # 39; Annual Car Buying Guide to view the history of the vehicle you plan to buy. Cars can be tricky because traditionally reliable models can sometimes have a bad year. You will also want to figure in the consumption of gasoline because vehicles of the same class can vary considerably.
And, when it comes to getting a loan, all sources of loan are not equal. If you have excellent credit, you will usually get better rates, but you will get offers before you go to the dealership. Credit unions often offer a better deal than traditional financing options, and you do not have to use dealer financing (although some dealerships do this).
Consider a car as a necessary expense, but do what you can to control these costs. It's possible if you're ready to drive the best car for what you need rather than the coolest or newest vehicle you can not afford.