When buying a new vehicle, the sticker price is only part of the cost. To avoid financial stress, plan for both the purchase and ongoing expenses that come with owning a vehicle. With a thoughtful car budget, you can something that fits your needs and finances.
Get started at Arsenal. If you’re ready to buy a new car, make sure you get a great, low rate to save money on monthly payments.
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Start with a realistic purchase budget
Before you shop for a vehicle, determine how much you can comfortably afford. Instead of focusing only on the monthly payment, look at the total cost of ownership.
- Your monthly income and expenses
- Existing debt obligations
- Savings goals and emergency fund needs
- Down payment amount
- Loan interest rate and term
A good approach is to set a maximum vehicle budget before visiting dealerships. This helps you avoid being persuaded into buying more car than you can realistically afford. You can get preapproved for an auto loan before you start shopping so you know exactly how much you can afford.
Save for upfront costs
The purchase price is not the only expense you’ll face when buying a car. Make sure your car budget includes the initial costs that come with the transaction.
- Down payment
- Sales tax
- Title and registration fees
- Dealer fees
- Initial insurance payment
The larger your down payment, the less you will need to borrow, which can reduce your monthly payments and total interest costs.
Account for monthly ownership costs
Many car owners underestimate how much they will spend after driving off the lot. Building these expenses into your monthly budget can help you avoid surprises.
- Loan payment
- Auto insurance
- Fuel or charging costs
- Routine maintenance
- Parking fees
- Vehicle registration renewals
Create a separate category in your budget for transportation expenses so you can clearly track what your vehicle is costing each month. You can use tools available in online + mobile banking to help you.
Plan for maintenance and repairs
Even reliable vehicles require ongoing care. Oil changes, tire rotations, brake replacements, and other services can add up over time and should be accounted for when it comes to your car budget.
- Set aside a fixed amount each month for maintenance.
- Build a repair fund for unexpected issues.
- Follow the manufacturer’s maintenance schedule.
- Address small problems before they become costly repairs.
Having dedicated savings for vehicle maintenance can prevent you from relying on credit cards when unexpected expenses arise.
Don’t forget insurance
Insurance premiums vary significantly based on factors such as your age, driving history, location, and the type of vehicle you buy. Before you make a purchase:
- Get insurance quotes for multiple vehicles.
- Compare rates from different providers.
- Ask about available discounts.
- Factor insurance costs into your overall affordability calculations.
Sometimes a vehicle with a lower purchase price may cost more to insure, making it more expensive in the long run.
Prepare for depreciation
Cars typically lose value over time. While depreciation doesn’t create a monthly bill, it affects the long-term cost of ownership. To minimize depreciation, you should:
- Consider buying a quality used vehicle.
- Research resale values.
- Choose vehicles known for reliability.
- Avoid unnecessary upgrades that add little resale value.
GAP Plus protection is an optional add-on for auto loans that covers the remaining balance on your vehicle loan if your car is totaled or stolen. The “Plus” typically includes added benefits like deductible assistance and a credit toward your next vehicle loan at the same institution. Ask us about adding this to your loan before getting a high-pressure offer from the dealer.
