I'm considering buying some basic transportation, and this will be the first time I'll take out a loan to pay for a car. What are some of the costs I need to be aware of besides my monthly payment?
You are smart to consider the other costs of owning a car. It won't do you much good if you can afford the monthly payment but none of the other costs of ownership.
Let's start with insurance. Check with a reputable insurance agent to get an estimate of the premium you'll have to pay for the type of vehicle you want to buy. The agent will discuss with you the types of coverage you'll absolutely have to have, as well as advise you on optional items such as towing or rental costs if your car is disabled. Lenders may have specific insurance coverage requirements to cover their interest in the car. Find out if you can pay the premium in instalments, and what the extra cost will be to do so.
Next, of course, is fuel. Estimate the number of miles you'll drive per month, and be generous in your guess here. It's amazing how many miles you can put on a car without planning. Figure the cost of gas for that travel. Divide your estimated monthly miles by an average miles per gallon you think your car will get. Then multiply that result by the cost of gas in your area. Remember that this is an estimate, so don't drive yourself crazy striving for absolute accuracy. Of course, gas prices fluctuate, so you might want to pad your results a little
Finally, allow for car maintenance, including oil changes, etc. Add these numbers to your estimate of the monthly loan payment, and you'll have a better idea of the total cash cost of owning the car.
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You are smart to consider the other costs of owning a car. It won't do you much good if you can afford the monthly payment but none of the other costs of ownership.
