Purchasing a car? Here's how much extra money you needMonday, September 16, 2019
BY CANDIECE KNIGHT
YOU may have seen financial institutions advertising car loans that provide 100 per cent financing on new vehicles. While more experienced drivers will know better, someone who is looking to purchase her first car might get the impression that she can walk into the bank, sign up for a loan, and drive out of the car mart that very day.
Financial advisor Granville Knight says the only way she would be able to do that is if she had made the right financial preparations.
“If you are getting 100 per cent financing on a car that costs one million dollars, I would recommend having about 25 per cent of that ($250,000) in savings,” he said. He gave a breakdown of the other costs associated with acquiring a car, and how much you will need to have apart from that bank loan.
Percentage of the loan amount
As most institutions only offer 100 per cent financing on new vehicles and used vehicles dating back about five years, you might need to stand a part of the cost. Also, depending on your income, you might not be eligible for a loan above a certain amount. Knight advises that you research the car you want beforehand and then shop around for it — not shop around trying to decide on a car.
Unless you are buying a second-hand vehicle for which the registration has not expired, you will need to license your car and probably buy new plates. This cost varies depending on the cc rating for the car. You can expect to pay between $12,000 and $18,000 for licensing your car, and even more for the plates.
This is perhaps the largest sum you will have to pay on your own, especially if it's your first vehicle. The cost you pay for insurance depends a lot on the value of the vehicle — the more expensive the car, the higher it will cost to insure it. The type of engine in the vehicle, whether it has an alarm system, and other features, will be taken into account, as well as how long you've had your licence and your driving history.
“For example, a friend of mine got her first car valued at $1.6 million, and her premium is just over $200,000,” Knight shared.
Titling and fitness
These are minor fees, but they must not be overlooked. If it is a used vehicle, there is also a minimal transfer fee to be taken into account. You can expect to pay about $10,000 to ensure that the vehicle is safe, and have it transferred to your name.
Especially if you are buying a used car, you will realise that in the first few months of driving, things will go wrong. It is wise to set aside at least $20,000 in the event that you need to change a part or have some fine-tuning done. The older the car, the more money you should put aside.
There are other features that you may want to add to your car that are optional but can be useful. An alarm system is a good investment, and can save you a bit on your insurance premium. Some drivers also like to install dash cams to not only monitor their vehicles in the event of theft, but also monitor their activities on the road in the event of an accident. You might also consider tinting your windows, installing wheel locks, or even adding your personal touches to the inside of the car. $50,000 should be able to cover this.
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