There’s nothing quite like buying your first car. One of the first major purchases you make as an adult, buying your first car is an accomplishment. It means you have finally reached stable financial standing, (so long as you stay smart with your money). It’s easy to get caught up in the excitement of getting the new car and forgetting that there are other costs that come along with it, the most important being insurance. To help you save, explore our car insurance comparison platform today.
Buying a Car 101
There are three ways you can purchase a car today: you can lease, finance or pay in cash. How we pay for a new vehicle is really dependent on the time and use we expect to get out of the car. According to the LA Times, Americans keep their cars for an average of nearly six years. This is in contrast to the once commonly held belief that Americans quickly bought and sold their cars after as little as three years of ownership.
Americans are holding onto their cars longer, and with automakers extending their warranties, the trend doesn’t look like it will end any time soon. As you think about getting a new car, there are a few things you might want to consider first:
Know What You Need: As a first-time car buyer, stepping onto that sales lot can be overwhelming. You have car salesmen coming at you from every which way, telling you what you “need” and how they can get you “the deal” you’re looking for. If you’re unprepared they’ll know it. Before heading over to the dealership, figure out what it is you need the vehicle for. Is it a commuter car, or will it only be driven on the weekends? Will it be used to shuttle the kids around, or just you and a companion?
Your Monthly Budget: When we’re excited about the prospect of a new car, it’s easy to lose sight of what we can actually afford. If you’re not buying the car outright, Kelley Blue Book recommends that you establish a monthly budget for yourself that includes car payments, auto insurance payments, maintenance repair and pit stops in addition to your cost of living. Cars are expensive, and with new vehicles costing $33,560 on average, it’s better to know what you can really afford before making that hefty purchase.
How Will You Be Making the Purchase?
As briefly mentioned earlier, there are three ways to pay for a new vehicle, you can lease, finance or buy it outright. But with each payment option also comes a varied auto insurance package.
Leasing the Vehicle: When you lease a vehicle, you don’t actually own it. You get to use the car for a stipulated amount of time, and then you must return it to the dealership, unless you have opted to buy it. The Department of Motor Vehicles (DMV) refers to leasing as a “long-term car rental.” Leased vehicles come with a set of rules, including:
Maintenance Requirements: This includes getting the oil changed regularly, getting the tires rotated and a general inspection.
Insurance Coverage: According to the Insurance Information Institute (III), drivers who lease their vehicles are required to purchase collision and comprehensive coverage on top of their state’s auto insurance requirements.
Mileage Limitations: The DMV writes that leasing contracts usually stipulate that a motorist can put between 10,000-12,000 miles on their leased vehicle per year. If they go over the allotted amount, they’ll be fined.
Financing the Vehicle: When you finance your vehicle, you are taking out a loan to pay for the cost of the car. Like leasing agencies, money lenders require that you purchase collision and comprehensive coverage on top of the auto insurance coverage already mandated by your state.
Buying the Vehicle: If you buy the car outright, you are the sole owner. All you are required to do is register the vehicle at the DMV and purchase an auto insurance policy as required by your state.
Buying a new car should be a fun, stress-free experience, and it can be. Let CoverHound take on some of the responsibility and help you find the auto insurance you need. Click here today for car insurance comparisons you can trust.