Auto Loans how much can you Afford

The gap between the cost of buying a car and the cost of owning one is enormous. According to the Edmunds TCO online calculator, while the 2005 Toyota Camry costs under $13,000 to buy, the true cost of ownership (TCO) exceeds $30,000 over a five year time span! Unless money is no object, several financial factors need to be weighed in prior to the purchase of a vehicle.

Taxes and Fees

Taxes and fees really add up, often costing over $1,000 – money that will come straight out of the owner’s pocket. Certain charges are negotiable, such as documentation and dealer fees, while others are not. Nobody is dodging vehicle registration fees. Car shoppers should research which costs are negotiable in their respective states, and take that information to the dealership.

Fuel Economy

Fuel is typically the most expensive cost of ownership. Gas mileage, greenhouse gas emissions, and air pollution ratings all make a major difference nowadays. Certain cars not only reduce the use of fuel, but they help buyers save with tax incentives. Tax credits for Earth-friendly hybrids like the Saturn Vue can reach into the thousands, and that can make a difference in your wallet.

Depreciation

Depreciation is as expensive as it is inevitable. It only take three years for most cars to lose half their original value! Some cars depreciate faster than others – something every shopper should take into consideration. Buying a car that’s at least 5 years old will help lessen this massive expense. For those who refuse to drive a car that outdated: Prepare to pay the price.

Maintenance and Repairs

Routine manufacturer maintenance schedules, which can be found online, tell owners when their vehicles are due for routine work. Maintenance shops can do the same, but owners might not actually need to get every suggested service. Proper care makes the call for repairs much less likely, so sticking to the schedule helps save over time, lowering the total cost of ownership.

Insurance Premiums

Insurance is one of those wide-ranging costs, dependent on both the vehicle and the driver. Safe drivers that have no accidents will have lower premiums. As for those who have gotten in a little wreck (or a not-so-little one), a defensive driving course can help. Nonetheless, the very best way to get a discount is to call the insurance company and make an inquiry.

Recalls and TSBs

Recalls are issued when vehicle safety is compromised. Problems that were the manufacturer’s fault are required to get fixed free of charge, whether they have to do with the steering wheel or seat belts. Recalls are not the same as TSBs (Technical Service Bulletins), which are not safety related. This means they won’t be fixed for free unless the car is still under warranty.

Cost Calculator

With all of these costs of ownership in mind, shoppers may be wondering whether they can afford certain vehicles. The answer lies in this equation: TCO+LPI+AOB should be equal to 40% or less of total income. TCO, LPI, and AOB represent “total cost of ownership”, “loan payments with interest”, and “all other bills”. Buyers should always know what they can afford before signing a contract.

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