Dave Ramsey Says Not to Forget This Cost When Buying a New Car. Here's Why He's Right

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  • Dave Ramsey recommends asking some key questions when buying a new car, to assess what your total costs will be.
  • In particular, he advises finding out how much auto insurance on the new vehicle will cost.
  • Determining this cost upfront can help drivers determine if the vehicle they're purchasing is affordable.

When buying a new or used vehicle, most people focus on how their car loan payments will impact their bank account. And while it's crucial to make sure monthly loan payments are easily within budget, there's also another expense to consider as well -- and it's one that finance expert Dave Ramsey warns car buyers not to forget.

Here's what it is, and why it's so important to take the expense into account.

Don't forget to consider the cost of auto insurance

Ramsey warned car buyers not to forget about how much their new vehicle will cost to insure.

See, car insurance is required in most states and even when it's not mandatory, it provides essential protection. Without insurance, drivers would be on the hook to buy a new car if theirs was totaled or to cover all losses they caused others in a collision. Plus, the cost of car insurance can vary by vehicle, so Ramsey wants drivers to make sure they're prepared.

"When you change cars, don't forget about how it might impact your car insurance bill," Ramsey said. "If you're turning in your hooptie for a much newer model, your insurance premiums will probably go up. That's why it's important to figure out exactly how much of a bump you're in for."

How to estimate your future auto insurance expenses

The good news is, it is really easy to get a clear idea of how much a new vehicle is going to cost to insure -- and anyone who is shopping for a new vehicle should heed Ramsey's advice and do the necessary research to estimate future premiums.

To do this, car-shoppers should make a list of the make, model, and year of vehicles that they are interested in looking at -- and then go online and get car insurance quotes for all of those vehicles. The vast majority of insurers will allow anyone to get an online quote for any vehicle within just a few minutes by providing some basic details.

Drivers can do this for all potential cars they may want to buy so they can see how much insurance premiums are going to be, both compared to what they are currently paying and from one car to another.

By taking this step, drivers can make sure that upgrading to a new vehicle isn't going to push their auto insurance rates so high they become unaffordable. Drivers can also make sure they pick a car that has reasonable insurance costs. If one vehicle a motorist is considering costs a lot less than another -- perhaps because there's less risk of theft or because the car has better safety features -- it may make sense to buy the one with the lower auto insurance premiums.

Ramsey advises working with an independent insurance agent to estimate the premium costs of future vehicles, but there's no real need to do this. Anyone with an internet connection and a few minutes of time to spare can jump online and make sure their auto insurance rate isn't going to put a dent in their finances after their new vehicle purchase.

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