- Car prices are soaring this year.
- Spending less could result in savings on auto insurance.
It's not just about minimizing your auto loan payments.
These days, inflation is making just about every living expense cost more. And that extends to cars.
In January, the average new car sold for $46,404, reports Kelley Blue Book. Since vehicles are in limited supply (thanks, chip shortage), dealers are getting away with charging buyers a premium.
If you're planning to purchase a new car this year, it pays to keep your costs to a minimum. Not only might that help you better manage your auto loan, but it could also make your car insurance less expensive.
Try your best not to overspend on a car
Car prices are just plain up across the board, so if you need a vehicle, you may have no choice but to spend more than usual. But that doesn't mean you can't take certain steps to save on a new car -- namely, by not choosing the most expensive model to begin with and forgoing some of the many upgrades dealers will no doubt try to sell you on.
The more money you spend on a car, the more you'll pay each month via an auto loan. And higher loan payments could really strain your budget. So if you're thinking of upgrading your car to one with seat warmers and extra speakers, you may want to reconsider if doing so adds to your loan payments.
You're also likely to spend more to insure a more expensive car versus one that's less expensive. The reason? If a pricier car gets wrecked, it'll likely cost more to fix or replace it.
And if you're thinking of spending extra to enjoy some of today's added safety features, think again. Not only might those features not result in a car insurance discount, but they might actually add to your costs by serving as yet another techy item to potentially fix or replace in the event of damage.
Proceed with caution
When you buy a home, there's a good chance its value will increase through the years so when you go to sell it, you'll make a profit. But cars work the opposite way.
A new car loses a large chunk of its value the moment you drive it off the lot. And in most cases, cars depreciate in value year after year, so if you decide to sell your vehicle seven or eight years down the line, you'll get a lot less than what you paid for it.
That's why it really makes sense to spend as little on a car as possible. This doesn't mean you should skimp on comfort or safety. Rather, you should find a car that meets your basic needs and requirements, but at the most affordable price point.
Spending less on a car will free up money for other bills and goals, like building a retirement nest egg. If you manage to keep your purchase costs down, you might enjoy some nice savings on your auto insurance, especially if you have a clean driving record and a decent amount of driving experience.
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