In this week’s post we are going to look at the hidden costs of buying car. Cars are wonderful things.

There are several commonly overlooked expenses that stand between you and your first car. Here’s how to be prepared for them.

The day is finally here. You received your license, you saved enough for the down payment and you’ve been perusing the car ads. As you know, buying a car is a lot more than just signing a few dotted lines. This will most likely be your first major purchase, and first opportunity to start building credit (if you decide to take out a loan).

Vehicle ownership is a major financial obligation.  It’s best to be well educated about what those costs are upfront so that there are no surprises later. There are many more costs associated with using and driving a car. Please make your decisions carefully, and plan ahead. 

Loans

A quick note, if you decide to take out a loan remembers that you are paying interest on a depreciating asset with post-tax dollars -that means you get hit three times. Firstly, you will be paying interest on your loan (this can range anywhere from 7-15% compounded annually (a great site to compare loans http://www.infochoice.com.au/personal-loans.aspx). Secondly, you are buying depreciating assets. Simply put, every day that car is depreciating – or, loosing value. Very rarely will you be able to sell it for the original price that you paid for it. Thirdly, your loan repayments (these will vary depending on how much you borrow) are paid using ‘post-tax dollars.” Getting a personal loan for a car is a serious decision and you will need to properly assess your financial situation and speak to qualified professional before you make a decision.

A loan can come in many shapes and sizes, depending on what lender you choose to use. The dealership where you purchase your car is the first option. It’s convenient because you’ll be signing all the paperwork in once place. The only problem: as with most things that are easy, you’ll probably end up paying a price.

Another option is a lending institution. Banks, credit unions and building societies tend to give better loan terms than dealerships. If you don’t have any credit history, you’ll most likely have to get someone that does to sign with you. This ensures that the lender will be paid, even if you’re not able to keep up with the monthly payments.

As with any legal document, carefully read everything (even that annoying fine print) before signing. Anything that you write your name on can be legally binding and can get you into trouble if you are not clear on what you’re agreeing to.

Vehicle Registration and Motor Vehicle Tax

Be prepared to pay Stamp Duty, which is typically not added to the sticker price of a vehicle by the dealership. In New South Wales, expect a car worth $10,000 or less to set you back $300, $20,000 or less will be $600. Another pesky fee is the annual motor vehicle tax. Currently it’s $177 for a medium and $205 for a large car (for accurate motor tax charges consult the Roads an Traffic Authority (RTA).

Compulsory Third Party Insurance

Judging from the name, you’ve probably guessed that this is required insurance. The prices vary according to a myriad of factors, including your age, location and number of demerits on your license. Check out www.greenslips.nsw.gov.au for more information.

 Petrol

You finally have those keys in hand and are ready to hit the road, but there are a few more things to consider. With the sky high price of petrol these days (almost $1 per liter!) it’s good to know where to get it cheap. Visit http://www.carsguide.com.au/site/tools-and-advice/petrol-prices/ for a handy tool to do just that.

Repairs and Upkeep

Set aside money for repairs and upkeep before they are necessary. To keep your vehicle in good running condition, it’ll need to be serviced every 10,000 miles. A good trick is to open a separate bank account and budget a certain amount of money to set aside every month. You’ll really thank yourself later when you need to deal with the occasional flat tire or other needed repair.

With a sound financial plan, your dreams of the open road can become a reality. Don’t forget to fasten your seatbelt!

For more information on fees and licensing, visit http://www.rta.nsw.gov.au/