Wednesday, October 26, 2011

Are You Able to Buy and Maintain a Car?

Car

Are you about to buy a car? Do you know what the expenses are when you own a car? It is not just the monthly installments, you have to think of the following monthly and yearly related expenses and factor them into your budget:

1.  Monthly installments: The more expensive the car, the more you will need to pay every month. The smaller the down payment you make, the bigger will be the amount for your monthly installments. The longer the period you finance the car, the more interest you will have to bear. The monthly installments will be a new and additional expense item in your monthly budget.   When you default on the monthly installments, your car can be repossessed because you are only a hirer of the car, the rightful owner is one of the financial institutions. Worse still, the outstanding amount may be more than the current value of the car and you still have to pay for the difference. When the amount is substantial, they may institute legal proceedings against you and make you a bankrupt.
  
2.  Petrol: Previously you use public transport. Now you have to pay more for your daily commuting to work. When your house is further away from the workplace, the more petrol you will use. In addition, the more often you drive the more petrol you will use. Petrol will cost you more than public transportation. It means you will have to allocate a bigger amount in your budget depending on the usage of your car.  

3.  Maintenance: When you have a car, you can’t be penny wise and pound foolish. Your car needs regular maintenance no matter what. It will even cost you more to repair if you wait for it to be out of order.  Regular car maintenance is another item in your budget. This is besides the replacement of worn-out tires and weak battery and not to mention other minor items like changing of fused bulbs.   

4.  Parking and toll: Previously you have nothing to do with parking and toll. Now you have to bear the expenses and looking for a parking lot is another headache for you. Please add this item to your monthly budget.

5.  Insurance and road tax: This is not a monthly expense item, but you will have to save in advance every month in 12 equal amounts so that when it is due, you will have a ready fund to renew your road tax and insurance. If you don’t, you may need to dip into your emergency fund or advance the amount from your company or get a personal loan from your buddy.

6.  Unexpected cash outflow: I know the car is new and you will drive carefully. However, you meet other drivers who are reckless and you end up with dents here and there, not to mention a major accident. Are you going to foot the bill and repair it or claim from your insurers? Don’t forget when you claim, you forego your NCB (No claim bonus).

7.  Upkeep of your car: OK, you can do it yourself to reduce expenses by not sending your car to the car spa. You still incur water plus other items to keep the luster and sparkle of your car.         


When you think of all the expenses and you are comfortable with it besides your usual living and household expenses, you can safely sign on the dotted line of the HP form and get your new car.    

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