Owning a vehicle costs money. I’m not talking about the loan, the insurance, or even the cost of the gas you have to put into it. I’m talking about regular maintenance so that you don’t end up spending a small fortune on vehicle repairs.
Recent estimates show that it costs $100-$150 per month to ensure that your vehicle is in good working order. Now there may be some months where your expenses are little to nothing. Then there are other months when you need a muffler replaced, a transmission fixed, a new set of tires, or more. When you break it down, you can expect somewhere around $1,500 every year just to keep your vehicle operable.
That’s where owning a new vehicle comes into play. Sometimes you can actually save money by buying new.
Maintenance Costs on a New Vehicle
When you buy a new vehicle, you expect that there won’t be any issues with it. In fact, most vehicles will come with a warranty that allows for free repairs anytime within the first few years.
Even beyond your warranty time, your vehicle should run relatively maintenance free for a while (depending on how many miles you drive). Having the oil changed every few months and having filters checked won’t cost much.
But there’s an even better deal when you buy a new vehicle. Timing your purchase properly, you can pick it up when the dealership is having a special that covers all maintenance for the first three years (some items, like oil changes, might be for even longer). This means all your oil changes, all of your tune-ups, and all of the regular service work, are taken care of. No out-of-pocket costs to you except repairs that may come up and replacement tires if you burn through the originals.
Over the course of three years, you may save over $5,000 when you buy a new vehicle.
Added Costs of Financing a Vehicle
That sounds like a great deal, but what about the added costs of financing? There are some considerations, and it’s important to calculate the costs before buying a new car and expecting to save money.
Let’s consider a $25,000 vehicle financed for 60 months at 4.9% interest. Over the course of five years, you will pay $2,838 in interest charges. That’s nearly half of what you save in three years because maintenance is taken care of for you.
Now consider that if you have great credit, you likely won’t have to worry about those interest charges at all. Many dealerships offer 0% interest financing if you meet their credit expectations. That means over the five year loan period, you pay nothing in interest, and you save by not paying for maintenance.
Also Read: How to Stay on Top of Routine Car Maintenance and Repairs
If your maintenance package runs out, you can always trade the vehicle in and get a similar deal on a new car to start the clock over; assuming the dealership still has the same deals going on.
But what if you don’t have great credit? That 0% financing is generally only available to those with the best.
Repairing Credit Before Applying for a Vehicle Loan
In order to get the best terms on your auto loan, you need to have a credit score that is over 700. If you’re just starting out on your credit journey, you have to use your credit appropriately, and give it enough time to grow.
Note: If you are unsure about what your credit score currently looks like, try Credit Sesame. It’s free and it’s easy to use.
For those that have missed a payment or two, or perhaps have gotten into even more trouble with their credit, the score is going to be a little harder to get up to that 700 mark. The good news: it’s not impossible to restore your credit score.
Long before you even go in to buy a new vehicle, you will want to make sure you do a little credit repair. This will give you plenty of time to have that score climb into the 700+ range so that when you do apply for the loan, you can get the very best terms, and ultimately save money on your new vehicle.
Save Money by Buying New
Most personal finance websites will tout the mantra that buying a new vehicle is never worth it. The claim is that you’re spending money on the novelty and not the item. But when you crunch the numbers, and you see how much you can save by having great credit, no interest payments, and minimizing your maintenance costs, for many people buying a new car with a maintenance package will help them come out ahead in the long run.
