How to Budget for Your First Used Car (Beyond the Monthly Payment)

“How much is the monthly payment?”

This is normally the starting point for those who try to work out how to budget for their first used car. The reason is simple; it appears to be the easiest approach to determine what you can afford and the only thing that interests many people right from the start.

However, we have all seen how situations change after the car becomes part of daily life. You could have had the payment comfortably within your budget range but the insurance may end up costing more than expected. Gas will no longer be a luxury and then come the expenses related to maintenance.

For these reasons, budgeting for your first used car should move beyond the monthly payment.

Start with a Budget That Reflects Your Real Expenses

Before going on the hunt for a specific vehicle, it may be helpful to know what you can afford on an ongoing basis, beyond just a car loan.

Typically, we'll advise those buying for the first time to consider the bigger picture in terms of their budget:

Income
Expenses
Cost of Living

Based on all of this, you can then determine how much leeway you have for a vehicle purchase and all of its costs, especially if you're still learning what to expect as a first-time buyer.

Insurance: One of the Biggest Monthly Costs

One of the biggest shocks that first-time buyers face is insurance costs.

If you’re just beginning your journey as a driver or do not have much experience with insurance policies, your monthly premium may be higher than expected. On top of that, the make and model of your vehicle will greatly influence the amount that you’ll end up paying for insurance.

We always recommend getting a quote prior to purchasing a used car. It’s one of the easiest ways to avoid being caught off guard.

Registration, Taxes, and Upfront Costs

In addition to the down payment, there are a few upfront costs that come with buying a car.

These can include:

Sales Tax
Title/registration costs
State inspection fees

This is not something you will need to pay on a continual basis, but rather something to consider when purchasing a vehicle or used car. Planning for them early makes the process a lot smoother.

Maintenance and Repairs: Expect Them, Don’t Guess

Any car, whether new or used, requires maintenance. This is the reality of owning one.

Regular services such as changing your oil, repairing or replacing your brakes, and getting new tires can all be anticipated. There are also some unexpected repairs that are likely to happen.

This is when choosing the right vehicle is important. Many have managed to save money on their purchases by simply choosing the more reliable option, even if it wasn’t the cheapest.

Fuel Costs: The Everyday Expense You Feel the Most

One of the biggest recurring expenses that you’ll face once you’ve bought your own car will be fuel.

And it adds up quickly.

This depends on the following factors:

Distance you travel everyday
Present cost of fuel
Fuel economy of the automobile

In trying to stick to a budget, this would be an expense that can actually make a difference depending on the vehicle.

Emergency Fund: Your Backup Plan

While most new car buyers may leave this one out, it goes a long way.

Accidents happen while owning a car. You can have a flat tire, need a new battery, or some little problem that will need your attention.

Just having some money reserved for unexpected things helps to avoid a small problem becoming a major financial headache.

What It Really Costs to Own a Car

If you add it all up, your car doesn’t just come down to one number every month.

It’s:

Monthly car loan payments
Car insurance
Gasoline
Maintenance
Vehicle registration
Extra savings for any unforeseen expenses

This is the true cost of car ownership.

And once you break it down like this, it suddenly becomes very easy to find a car that really works within your budget, not just on paper, but in everyday life.

How We Help First-Time Buyers at Hi Lo Auto Sales

We understand the significance of buying your first car; to many customers, a vehicle is more than a means of transportation from one location to another. It is a way to gain independence and make responsible financial choices and decisions.

This is why we spend extra time going beyond the numbers involved in a typical car loan application.

We discuss your budget, the type of your everyday driving, and whether you’re ready for an investment in a particular model. Because it’s more important for us to help you pick up the vehicle that fits your budget and current lifestyle than push you to buy a car just because you can afford it.

If you're considering your first purchase of a used car, get acquainted with the options you have here at Hi Lo Auto Sales, see if you pre-qualify with our financing, or contact us directly.

Still deciding where to buy? See why first-time buyers choose Hi Lo Auto Sales and how we keep the process simple, honest, and built around what works for you.