We should not spend more than 10 to 15% of our gross income on Transportation costs.
People usually assume discounts to be their monthly payment of car this could not be further from the truth.
The total cost of owning the car is way more than just your monthly payment.
Breaking down the costs so that it we don’t even car monthly payment.
Let’s say you buy a car worth $25,000 you financing over five years with interest rate of 3% your monthly payment will be around $450.
Insurance this can vary a lot depending upon where you live the type of car you were driving in your previous driving record.
Let’s use an average of $100 per month for gas. Let’s say your car has 15000 miles per year and your estimated cost of gas per month will be around $120 registration and taxes depending upon the state you might have to re-register your car from state-to-state.
Let’s use a median price of $150 per year $12 per month maintenance and repairs it’s usually recommended that every 7000 miles we should have a car’s tires rotated and oil change discounts can vary.
The type of car let’s use $100 for maintenance and if you drive 15000 miles per year than you need to do this regular maintenance at least twice a year. So $200 per year equals to monthly cost of $17 and if your car is new then it will most likely be under factory warranty but if it’s old.
Paying some deductible in small accident to pay parking or traffic tickets from time to time. Some people like to get their car washed from outside as well which adds to cost of ownership.
Parking fees can also be a big contributor. These costs can vary widely from one person to another when it’s a random figure of $100 per month.
Now look at all these expenses and you get total cost of ownership to around $800 per month.
Almost double the cost of monthly payment of $450 especially if it’s an unexpected repairs.
Once you have an idea of the kind of car you want and roughly how much you’re looking to spend the next question might be new or used a used car will often cost less than a new one but a new car may be more reliable.