How much can I actually pay for a car?

Driving is an expensive task no matter where you live in the world. Especially in Canada, with our legendary winters. With these winters come rust, potholes, black ice and skirmishes, as well as anything that is exposed to the sun and causes wear and tear on vehicles. But of course, the weather is not the only thing that increases the level of damage to our cars and decreases their value.

Gasoline, maintenance, insurance and records must be taken into account in determining the true cost of owning and using a car or truck of any type. People who regularly drive a car no longer have surprises. Cars cost money with every acceleration and braking. Some people have no problem dealing with these costs, while others have to put all their money together to make their payments.

New cars, in particular, are dangerous for the finances of many people from the time of purchase to sale. Even used cars have all kinds of problems. That being said, for many people, driving is a necessary evil they must have in order to make money. Again, all this money often ends up returning to their car. Our question is: How much can you afford for a car? If you’re a regular driver and you’re considering buying, renting or financing a car, you need to ask yourself this question before making a big decision.


What are your options?

car loan

For the argumentation exercise, suppose you do not own a car. Some people have the chance to inherit the kitty from a family member. Maybe they managed to find a good deal on Carjie Financing. For older and more used cars, drivers face general problems such as fuel, repairs / maintenance and insurance.

However, they will probably not have to worry about other issues, such as down payment, warranty expiration, monthly payments and interest on a new or slightly used vehicle. In fact, buying a new or slightly used vehicle is another thing in some respects.

All these problems with new cars are things that most drivers are willing to ignore in order to move around. Thus, because of this desire for convenience, most of the time, these same will not rethink these problems until it really becomes a financial problem.

When you earn enough income and drive a car of the year, this type of problem may seem far away. Only when you realize that you have no extra money as your bank account begins to suffer. So for all these reasons, you must be very sure that you really need a car. Consider all of these options before starting to visit dealers.

Is public transit a viable option? Can you walk or bike instead of driving? Why not buy a scooter or moped? Again, depending on where you live, public transit may not even be accessible, as in rural areas. Taxis and Uber rides accumulate quickly. So, if there is no bus or train in your municipality, driving your own car might actually be the only way to get from one place to another.


What type of car are you trying to have?

What type of car are you trying to have?

Imagine that you are thinking of buying a new car, or at least a used car, less than 10 years old with less than 100,000 km. Research is essential for any major financial decision and the purchase of a car is no exception. You can and should ask yourself a lot of questions before jumping on the first vehicle that catches your eye. Here are some of these questions:

  • What kind of car do you want? A car with a suitcase, a sedan, an SUV, or a van?
  • What color will it be? Believe it or not, some colors may actually be more expensive than others.
  • How much will you pay in essence for each of these choices?
  • How easy and affordable will maintenance be for different makes and models?
  • How are you going to pay for? Do you rent, finance or pay in cash?
  • In case of financing, do the dealer or your bank offer a better rate?
  • How much will your payment be?
  • What will your payments look like? Monthly, weekly or biweekly?
  • Will the car be covered by a warranty? If so, for how long and what will it cover?
  • How will the cost of the vehicle affect your finances in the near future?

Obviously, not everyone can afford a new Ford Mustang. So, as a simple example, we are going to use a car that is a little more reasonable and more fuel-efficient, like a Toyota Prius. The average price of a 2017 Prius Core is $ 29,404. We assume you can not get to the dealership with almost $ 30,000 in your pocket.

We will therefore choose the financing by the dealer. In general terms, the minimum duration of available funding is 36 months (3 years). You can choose to extend this payment period in 12-month increments (84 months being the maximum), but we will only use 36 months as an example.

If you choose monthly payments, it means that you will pay $ 816.78 per month for 36 months. It does not include GST, QST, tire taxes, interest payments and all other expenses related to the car. Once again, the Prius is one of the most economical cars on the market. Imagine a van, SUV or sport car.

For some, this price might not seem unreasonable at all. Know that instead of spending a year’s salary on a new car that you may not be able to buy back later, you could put almost $ 10,000 in your RRSP or similar account in those 36 months.


Depreciation of vehicles

Depreciation of vehicles

All things considered, be aware that by the time you finish the payment period, you could end up paying a lot more than what the car really is worth. Almost all cars and trucks are depreciating over time. In fact, most cars lose about 9% of their value as soon as you leave the dealer’s parking lot, 19% by the end of the first year. It is not a problem if you plan to buy the car, drive with it and get rid of it after a few decades. However, if you want to sell it at any time, do not set your expectations too high, because it is likely that you will never reach what you have invested.

This does not mean that buying a car, especially a new one, is always the wrong choice. These are all questions that must be taken into account before embarking on tempting offers, regardless of your income. If you absolutely need a car and are worried about being unable to make payments, consider buying a used car instead until you buy something newer. It is better to drive a small car and not have to worry about basic problems than to get your car, or to go bankrupt after several late payments.


Reduce costs and save for the future

Reduce costs and save for the future

Once again, if you insist on owning a car, it might be better for your finances to buy a used car. Not only will a used car be cheaper overall, but your payment term, if you fund it, should be a little shorter than that of a new vehicle.
Just make sure that you also consider all the other unavoidable expenses related to the car before making your decision. Let’s face it: a car will make holes in your savings, whatever its make or model.

Even when driving an old small car, if you want to keep it intact, you will need to be diligent and bring the car to the mechanic on a regular basis, taking into account parts and labor. For people who live near a transit system, you can try to use it occasionally, instead of taking your car every time. This can also save you a decent amount of money in the long run.

All in all, everyone’s financial situation is different, especially for those of us who need a car to get to work, school or grocery store. There are cars of all shapes and sizes. Some are cheaper than others, some consume more gasoline. Whichever car or truck you are looking to buy or drive now, it is also important to book money for the future. And when we say “the future,” we do not necessarily mean for your retirement.

It is difficult to predict future events, whether they occur tomorrow or in several years. As a consumer, we tend to spend. You could save with your rent, and the next day you get in by another motorist and have to use all your savings to make the necessary repairs and no longer have an advance for your rent.

To conclude, we are not dissuading you from buying a car, we are just trying to give you an idea of ​​what your car could cost you in the next few years. Any decent car can be a valuable tool that you can use to progress in life, provided you work hard to take care of it. Always keep in mind that a car is a responsibility that could lead you to a better financial future, so take care of it and drive carefully.