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It’s important to factor in the cost of auto insurance when buying a car. Read on to learn more.
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So far, 2023 is shaping up to be a pretty bad time to buy a car. Not only are vehicle prices still elevated due to lingering supply issues, but borrowing rates are up across the board due to recent interest rate hikes implemented by the Federal Reserve. As such, any auto loan you sign today might come with a higher interest rate attached to it.
That’s why it pays to do what you can to keep your car ownership costs to a minimum. And that means opting for a car that isn’t the fanciest one on the lot.
But if you’re going to splurge on that fancy car, make sure to budget in higher costs for auto insurance. Chances are, you’ll end up spending a lot more money to insure your vehicle than you would with a more average car.
Going high-end might cost you in more ways than one
If money isn’t particularly tight and the car you drive is important to you, then you may be inclined to upgrade to a fancy model this year, even if that means having to pay more in the form of a down payment and auto loan. But in a recent blog post, financial guru Suze Orman cautions that, “A fancy car can cost $500 more a year to insure than a less flashy car.” So that’s an expense you’ll need to keep in mind.
Of course, it’s not just auto insurance that will cost you extra with a high-end vehicle. You’re also looking at spending more on maintenance and repairs. Luxury vehicles tend to come with more expensive components that cost more to handle and replace.
Let’s say your car is swiped and your passenger-side mirror gets smashed. If you own a regular car, you might spend $200 to $300 to replace it. If you own a high-end vehicle, it might cost upward of $1,000 to get a new mirror if the one that broke has fancy components like a camera built in.
That’s why you’ll need to be really careful when shopping for a new vehicle. Even if you can afford the monthly auto loan payments associated with that purchase, you’ll need to make certain you can also swing the associated costs, like higher car insurance premiums, maintenance, and repairs.
Should you buy a luxury car?
Some people spend a lot of time on the road every day going to work. If you’re in a good place financially and have been saving up for a nicer car, then you may decide you’re going to treat yourself to a more upgraded car you’ll be using all the time.
But before you make that call, do yourself a favor and really research the costs associated with owning a luxury vehicle. The last thing you want to do is risk falling behind on any of your bills because you opted for a car that’s not as affordable to you as you expected it to be.
If you do decide to buy a fancy car, make a point to shop around for auto insurance. You may find that one insurance company has a better rate to offer than others, and that small amount of savings could go a long way given your other costs.
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