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Budgeting for Your First Car

One of the first big milestones in your adult life is buying your first car. Owning a car gives you the freedom to travel, but it also brings certain responsibilities. As a car owner, you’re tasked with tackling all the expenses associated with purchasing and maintaining your vehicle.

By approaching your purchase in a structured and organized way, you can avoid unnecessary hassles and stress. In other words: prepare a budget.

Here are some tips to think about as you prepare your budget.

Set a Purchase Price.

Your first step in making a car purchase involves deciding how much you’re willing to spend on your vehicle. Unless you have been saving for a long time or have other funding, you will most likely have to finance your first car.

The best rule of thumb when getting a loan is to set your payment at no more than 20% of your monthly income. This will help make sure that you have enough resources on hand to meet other financial obligations. One of the biggest factors of purchase price comes down to picking a new or used vehicle. There are pros and cons to each.

New cars have the benefit of never been driven, which will delay certain types of repairs. New cars also come with warranties that protect you from repair expenses. The other option, a used car, typically are more affordable than new cars. If purchasing a used model, it’s important to have a mechanic inspect the vehicle. You can get the best of both worlds by purchasing a certified pre-owned model. These cars have been thoroughly inspected and refurbished, and the repair risk is lower than the average used car. You will want to look for a CPO program that is backed by the manufacturer, since these CPO models come with manufacturer warranties.

Include Registration and Title Fees.

Each state requires that a newly purchased car be registered by its owner, and this registration comes with certain fees. To find out how these fees are calculated and what your approximated cost may be, contact the Oklahoma Department of Motor Vehicles.

Consider Sales Tax.

Most states collect statewide sales taxes, and the rate can be as high as 7.5%. You will be taxed on the total cost of your vehicle purchase, so it’s important to factor it into your budget calculations. If you purchase the car from a dealership, the taxes will most likely be included in your monthly payment, but if you purchase the car from a private seller, you may have to pay them separately when you register your car.

Don’t Forget Insurance.

Car insurance is required by law, but the minimum coverage required varies from state to state. Going with the absolute minimum is not always the best idea though, as they are quite low and may not be enough to meet your needs in an accident. Consult with a professional to get a sense of the coverage that best suits your needs.

Saving for Maintenance and Repairs.

Throughout the life of your car, there will be wear and tear, parts will need to be replaced and repaired. You can stay ahead of these expenses by including them in your budget. The amount required for maintenance will depend on many factors. One factor is the age of the car. Typically, the newer the car, the less money you’ll have to spend on maintenance. Another factor, is the cost of the car, usually an affordable hatchback will be cheaper than a costly luxury sedan, since the parts for these economy cars less expensive.

From a financial perspective, car ownership sometimes brings a few bumps in the road. Some expenses are easy to predict, while others may be more unexpected and unusual. However, with smart financial planning, you’ll be ready for all outcomes.

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