Driving out a dealership in your new set of wheels is almost like a rite of passage into true independence. Never having to ask someone for a lift again, or waiting for someone to pick you up − this is now a memory of the past.
For most people, a car is the first big purchase they will make, and this means that a whole lot of serious thought has been given to the car selected and its cost.
Fancy or not, for newbie car-buyers, this is not only a financial investment but an emotional one too. And, it doesn’t take out that much from your budget, given the fact that you can afford your monthly installments?
Wrong. Owning a car includes two sets of costs: Fixed costs and running costs.
Fixed costs are your monthly installments; these include not only your repayment to the bank, but also your insurance premiums, interest rates, depreciation of your vehicle, and VAT – these also depend on your age, the area you live in, the model of the vehicle, and your driving history.
While you may know about these costs already, and find them pretty self-explanatory, you may be wondering what exactly depreciation is. Depreciation is the difference between the amount you paid for the car and the amount you get back when you trade the car in. This being one of the biggest factors influencing the true cost of a vehicle, and unfortunately often overlooked.
But don’t let this get you down, on the more positive side, the longer you keep the car, the less you’ll pay in fixed costs. Meaning that you’ll only have to pay registration and administration fees once, and the longer you keep the car, your depreciation will lower, and the less you’ll have to pay on insurance. And if you decide to pay your car off immediately, your repayments will fall away completely.
Running costs, however, tend to increase the longer you keep the vehicle. What are these? Fuel, maintenance and repairs, parking fees, licensing, traffic fines and even e-tolls.
Unlike fixed costs, running costs increase the longer you keep your car. And as your car grows older, your maintenance fees will increase, and the fuel consumption could be negatively affected.
So how do you compensate for your gains and losses?
The increase in your running costs should be outweighed by the decrease in your fixed costs, provided that you are a responsible driver.
So what is the real cost of owning a car?
Factoring in your fixed costs, running costs and the fluctuating petrol rate. The true cost of owning a vehicle could double. That’s why, if you’re on a budget, and don’t want to break the bank − it is wiser to buy a smaller engine, as this is more fuel-efficient.
Yes, you might be yearning to own a sportier flashier new vehicle, but the responsible approach would be to go for an affordable model, that has all the safety and comfort features, and which gets you from A to B.
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