The car’s costs more difficult to get into its monthly budget – Car Loans
The car is a source of many expenses, it is probably a fairly general view. We all know that it costs a lot to have a car but the convenience, agility and the fact that one often simply needs a car outweighs that expense.
The tricky thing, though, is to correctly assess how much the car costs on average each month and to set up a budget for the car that fits the reality.
A monthly budget is a calculation that is really good to have
It is basically a list of all the expenses you have in a regular month, with the purpose of showing a little more precisely how much money you actually spend on average per month. This is important because you want to see how much money goes out in relation to the money that comes in the form of salary, grants and other things.
When you see how much spending you have each month, you can first and foremost see that you are going plus – that your finances are healthy and that you do not have excessive expenses. When you know that you are going plus you can then see how much you are going plus, so you can decide how much money you can spend on different types of savings and how much you can get over for fun and to waste on nice / fun things.
The costs of the car are harder to see in a monthly perspective
There are many things we pay each month that are relatively easy to throw into a budget calculation. These include, for example, housing costs such as rent / fee, interest, amortization but also insurance, electricity bills, heat and water, garbage collection etc. Other fees that are also usually easy to keep track of are, for example, mobile subscriptions, TV and broadband and similar things.
Often we get bills for these things every month or pay on autogiro monthly. Sometimes the bills may come a little less often than once a quarter, depending on what you have chosen, but it is then quite easy to divide such a bill by three and get the monthly cost. All such expenses are pretty obvious when we are going to make our monthly budget and easy to put in.
What is so different about the car?
What makes the car more difficult to get into the monthly budget is mainly that there are many expenses related to car ownership that do not come that often. Many of these expenses may appear once or twice a year. It is not even certain that they show up regularly but it can be a little different, which makes it extra tricky.
Petrol / fuel is something that one can usually budget for as it is a recurring expense each month. It may be a bit trickier to enter this item compared to, for example, an insurance policy, since the cost of the insurance is exactly the same every month, but how much fuel you consume can vary from month to month. However, simply inserting an average amount and it should be fairly easy to assess. It is the same as one may do with the food costs.
Things that can be a little trickier are expenses that come back once or twice a year. This includes car tax, car service, inspection and such. These things come back in principle every year, but since it is a single bill that only comes once a year, it is easy to forget to include them in their monthly budget.
Even worse is the cost of repairing the car. It is impossible to say how often you have to spend money on repairing something that has been broken and it is almost as impossible to say how much it will then cost. Sometimes you just need to change a lamp for a few hundred and another time you may need to fix something that costs USD 5,000 – 10,000. Cars are tricky that way.
It is important to still try to include the car in its monthly budget
Although it is easy to forget, it is still good to include all the costs of the car in its monthly budget. It may feel strange to take an expense in a monthly budget that only shows up once a year, but it is still something that has to be paid and if you know that it is an expense that returns annually, then there should also be money for it when it does show up.
Service on the car is a good example as it can go for two, three thousand patches annually, a little depending on how careful you are with servicing your car. If you usually hand in your car to the workshop around October every year then there will also be an expense of say USD 2,500 in October that must be paid.
If you have planned this and saved money for this in your monthly budget every month throughout the year, it is not a particularly strange thing and you will easily cope with that expense. But if you have not thought about it directly or saved money, it can suddenly become a somewhat unexpected knock on USD 2,500. Of course, how much it actually stays depends on how large margins you have in your finances.
Someone with very good finances may not know this, but anyone with small margins does not want to suddenly get a big expense of this kind. If you have a slightly weaker economy with smaller margins and are considering buying a car, you should also include for example service and the like in your monthly budget, when you try to determine if you can really afford to buy / own a car. Tried not only to think of obvious expenditures as fuel, but also these slightly more scattered expenses.
How should you practically do / think to get a better order of the car costs?
Firstly, what I just mentioned is good to make a budget before buying your car to see that you can afford to buy the car and that you can afford to own it. When you buy a car, it is probably the question of a car loan where you have to pay interest and pay off every month. You should put these items in your monthly budget to see that you are still going plus in your finances after the car is included.
Then you also have to calculate a lump sum for fuel, as much as you think this will cost each month with normal driving. Then there is also the car insurance, which you can advantageously pay via autogiro monthly. If you have to pay for parking space, this should of course also be included in your budget. Finally, you also have to remember all the slightly more scattered but fixed fees such as car tax, inspection, service and the like.
The expenses that come only once a year can be divided into twelve to get an idea of how much it affects your monthly budget. It is important, however, that you do not neglect to include them in the calculations. After all, you still have to go plus feeling that you have sufficient margins in your finances, otherwise you have to think again if you really should buy a car.
Do you know what to pay then you can start saving
Once you have purchased a car, you can use your monthly budget not only to make sure everything is going around financially and that you have margins, but you can also use it as a template for how much you need to save.
If we expect a service for example USD 2,400 and you want to carry out such a yearly to keep your car in good shape, it will be USD 200 per month. USD 2,400 sounds pretty much like a lump sum, but USD 200 monthly doesn’t sound so dangerous. If you can only save USD 200 a month until the time you have to perform service on the car then it will not be so difficult to pay for this when the day comes.
So you can use your monthly budget to calculate how much you should save for future car costs. Feel free to spend this money each month in a place where you have them checked and know that you are not using them for anything else. This way you make sure that you do not waste your money on the entertainment without thinking about it and you have them ready when it is time to pay for your car service.
Create a pot for repairs
You can also do the same with money for repairs – you can create a kind of pot by putting away a little each month. As long as nothing happens that requires repairs, the pot lies untouched and grows slowly but surely – and the day you then happen to break something that requires action, you already have money to fix it.
Depending on how much you spend and how long it takes before you have to spend your money, you can manage various large expenses. In other words, if you have managed for many years without any problems then you can have a large buffer saved and it is a pretty nice security to have. If something should turn up, you don’t have to worry about not being able to afford to fix your car. Then the money is already in place.