Buying a Car? Consider the Additional Expenses!
Nov
13
Friday, November 13, 2020
It’s Financial Literacy Month! And while Financial Literacy Month in November is always important, this year’s theme of financial literacy in uncertain times really hits home.
If ever there was a time to get smarter about money, it’s now!
Let's kick off the discussion with how to budget for the vehicle you want to buy. Typically, the biggest expense when buying a car is the car itself, but what other expenses should you consider? There are gas and parking of course, but let's look at the additional costs, so you don’t get blindsided later on!
Costs Associated with a Vehicle Purchase
1.Fuel: whether it's gas or electric, you need to set aside money for this recurring cost
2.Parking: depending on where you live and work, fees can vary dramatically. Parking fees in Toronto, for instance, can range between $50 to $375 per month.
3.Repairs and general maintenance: general maintenance includes oil changes, tire rotation, brake servicing and windshield wiper replacement. These are the routine services that ensure your vehicle runs efficiently. Because vehicle maintenance happens regularly, you’ll quickly learn how much money to set aside for it. Repairs can be a little more unpredictable, depending on your car’s age and condition. Unless you have a warranty, always have money set aside for repairs.
4.Warranty: An extended warranty may make sense if you plan to keep your vehicle for a long time, put significant kilometres on your car each year, or would not be able to afford a significant repair bill.
5. Insurance: depending on the individual (age, location, experience, driving history, etc.) and the vehicle itself, monthly insurance costs may be more than car loan payments. In Ontario, annual average insurances costs about $1,920.
6.Financing Costs: Unless you plan to pay cash for your new vehicle, you'll have to finance your purchase. Arrange financing through the dealership or the bank. Contact your bank before visiting the dealer so you can compare the rates available. Be careful about choosing extended-term car loans (6-9 years). While these loans offer lower monthly payments, they can often result in negative equity - owing more for a vehicle than its actual worth. To learn more, read about extended-term loans and negative equity on our website
How to Calculate Your Monthly Budget
Once you know your monthly budget, subtract the additional costs from this total. The number you come up with is how much you can afford to pay each month.
Purchasing tip: When negotiating the price for a vehicle, negotiate based on the car's total cost, not just the monthly payments.
Remember All-in Price Advertising!
Once you finally know your new car budget, you're ready to start your car-buying adventure: test-drives and all. As you start your search for your dream vehicle, remember, if a dealership advertises a vehicle's price, there should not be any additional charges added to the price except for HST and licensing. It’s the law.
About OMVIC
As the regulator of motor vehicle sales in Ontario, OMVIC’s mandate is to maintain a fair and informed marketplace by protecting the rights of consumers, enhancing industry professionalism and ensuring fair, honest and open competition for registered motor vehicle dealers. Visit omvic.ca to learn more about your car-buying rights as well as additional tips for buying a car in Ontario.
For car buying tips, check out the OMVIC Academy. You can view other resources such as multilingual videos and download the OMVIC Car-buying Guide
Connect with OMVIC on social media!
Ontario Motor Vehicle Industry Council
@omvic_consumers
@omvic_official
Ontario Motor Vehicle Industry Council
www.omvic.ca
www.ontario.ca/page/consumer-protection-ontario
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