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Whether you just got your license or need a ride for an after-school job, consider these common costs before buying your first car
Set your budget
Determine your budget. Knowing how much you can spend will help you focus on cars you can actually afford. You may be planning to pay for the vehicle outright with money you’ve already saved up.
Be sure to factor in additional costs like upfront fees for the registration, inspection and license plate. Then there are ongoing expenses like insurance, maintenance and gas. Some states charge a yearly tax for owning the car, too.
It costs about $10,728 a year to own a new car, according to AAA.
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What it costs
Whether you buy the car outright or plan to get a loan, be sure to factor these other expenses into your budget.
Insurance
About $2,000 annually for a young driver
Gas
Roughly $3,000 a year
Maintenance
$1,452 a year for oil changes, replacing air filters and other repairs
License, registration & taxes
About $675 annually
Parking charges and road tolls
Expenses vary
Sources:Carinsurance.com, AAA "Your Driving Costs" 2022
Get preapproved for an auto loan before you even begin car shopping. Knowing your approved interest rate and the amount you can borrow ahead of time will help you stay on budget.
Find the right car
Now for the fun part. Start researching online to see what kind of vehicle you can get for your budget.
As a new driver, you’ll have to consider car safety and reliability. As a general rule, bigger cars are often safer than smaller ones. A midsize sedan might withstand a crash better than a compact vehicle, and its low center of gravity generally makes it less likely to roll over. Also, look for cars that don’t highlight horsepower. Cars with smaller, more practical engines and drive trains (and hybrid or electric cars, too) can encourage safer driving and also save you money on insurance and fuel.
You’ll also need to make certain trade-offs to find the right combination of features at the right price. One obvious option to consider: Will you buy new or used? While new cars are more expensive, of course, they may offer safety features that aren’t available in older vehicles, but are especially valuable to new drivers, from backup cameras to driver-assist technologies such as automatic braking. You can also consider a certified pre-owned vehicle. It may cost more than other used vehicles but may come with a limited warranty and, potentially, lower insurance costs.
Paying for your vehicle
If you’re under 18, most states won’t let you be the actual owner, so you’ll need a parent or other grown-up to own the vehicle. Once you reach the right age, they can transfer the title to you. Consider these common payment options to help get you in the driver’s seat:
Buy it outright:
You can pay for the entire cost of the car with money you’ve saved or with help from a relative.
Get a loan:
If you cannot afford the entire cost of the car, you can get a loan. Legally, only someone over 18 can get a loan and, even if you are 18 or older, the lender will probably ask for your parent or another adult to co-sign. However, you’ll need to make the payments every month, or it will have a negative impact on your credit—and on your co-signer’s credit, too.
Leasing:
When you lease a car, you don’t technically own it—you pay for the right to drive it. This can be an affordable way to get a newer car. However, the lease will limit the miles you’re allowed to drive. (If you go over, you’ll pay extra.) And you must return the car when the lease is done (or you can buy it then). The dealer will also charge you for any damage.
Practice road safety
Remember to be smart about driving. Even a single accident or ticket can cause your insurance payments to go up. Everyone, no matter how long they’ve been driving, can be safer by avoiding distractions. Just two seconds of distraction can double crash risk.
It helps if you disable any voice-activated and touch screen technology. Most states ban using your phone while driving—whether for a call, to text or otherwise. Even if you’re using hands-free tech to talk or text, the human brain has a tough time doing two things at once.
Don’t just hold yourself to these safety tips—make sure your parents and the adults in your life follow them, too.
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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America Corporation and/or its affiliates assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management. ©2024 Bank of America Corporation.
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