Let's talk about the sheer joy of buying a new car! Whether you've decided it's time to part ways with your old and tired ride or you're getting ready to become a car owner for the very first time in your life, buying a car is nothing short of exciting. You can already imagine yourself getting behind the wheel of a brand-new vehicle and driving it off the dealer's lot, dreaming of all the adventures that await you. Then you think about how you're going to pay for it and it's back to reality for you.

Dreaming is nice, but turning your vision into reality is even better. And that means you've got to get down to business and learn how to plan your budget. Otherwise buying a shiny new ride will remain just a distant goal. Sorting out your finances is definitely the least pleasant part of the whole process, but also the most important one. So here are the aspects you should consider, if you want to do the math and plan your budget effectively.

Your total budget

If you want to determine how much money you can afford to spend on a new car, you have to assess your total budget. This can be a painstaking task as you have to calculate your total income and all your monthly bills and expenses to get an accurate idea of your financial situation. So, grab a pen and paper and write down all the figures, making sure you leave nothing out.

The car's price tag

Based on your calculations, you can start checking car prices and see what makes and models fall within your price range. However, keep in mind that the vehicle's price tag is far from the actual cost of owning a car. This is indeed the main expense you have to consider, but there are many other financial factors that come into play in the long run. Remember that when you plan your car budget if you don't want to find yourself in financial trouble later.

Monthly payments

Assuming you won't have the money to pay in full for the vehicle, you'll have to look for financing options. That means you'll have monthly payments to deal with for quite some time. You have to do your research and find a lender that will provide the needed amount at a reasonable interest rate and for a period of time that you'll find appropriate. Make sure to shop around and compare your options before you make a decision.

The down payment

In most situations, you'll have to make a down payment to purchase a car. As a rule of thumb, the bigger the down payment, the lower your monthly payments will be. Ideally, you should put aside a substantial amount for the down payment so you don't burden yourself with large monthly payments for years to come. However, that largely depends on your total budget and your ability to save money.

Trade-in value

If you have an old car that you can trade-in, that's good news for your budget, as it can help you reduce the total amount you have to pay for the new vehicle. But before you jump for joy, you have to determine the trade-in value of your car. The age of the vehicle, the mileage, its current condition, collision & repair history are some of the factors that will influence your car's worth. So, if you've been a thoughtful car owner and kept your vehicle in good shape or if your old and tired ride is not that old and tired, you'll be able to get a better deal.

Fees and taxes

Some car buyers simply forget about the registration fees when they plan their budget. Don't be like them. Add registration fees and taxes to your lists of car expenses, and make sure you understand all the terms and conditions before you sign on the dotted line, so you don't end up paying extra fees afterwards. Also, don't forget this is only the beginning as you'll have yearly taxes to add to the equation as well. You won't pay fees and taxes every day, but in time they will add up and leave a dent in your budget.


Having a cat insurance is a legal requirement, so here's another car cost you can't avoid. But what you can do is look for the best policy on the market so you can lower your recurring expenses. The golden rule is to compare insurance quotes from different providers and get the best deal for your future vehicle. If you're not comfortable giving out sensitive personal information to get insurance quotes, you can search for car insurance quote without SSN and find the information you need while protecting your privacy.

Maintenance and repairs

Your new vehicle won't stay new forever, but you can keep it in tip top shape if you keep up with regular maintenance and practice good driving habits. Needless to say, maintenance will come at a cost and that will also increase your car budget. But it will cost you a lot more if you ignore maintenance tasks and have your car break down in the middle of the road when you least expect it. Then you'll have to deal with pricey repairs and a lot of stress on top of it all.

Fuel costs

Your car won't be running on thin air. That would be great for the environment and for your budget, but since that's not how things work, you've got to take fuel costs into consideration. The amount you'll spend monthly on fuel will vary on your car's fuel efficiency and your driving habits, and obviously on gas prices. So, you have to consider the fuel consumption of the car you're planning to buy, assess your driving skills and think about the trips you make on a regular basis to determine your monthly fuel costs.