Navy Federal Credit Union | MakingCents: New Car Costs


[MUSIC PLAYING] Getting a new
car is a big deal, so make sure you
fully understand the monthly payments and
other costs that come with it. It will keep you happy,
even after the new car smell starts to fade. A down payment is
what you pay upfront in order to secure a loan. The more money put down,
the less you have to borrow. The higher your down payment,
the lower your monthly payments and less you pay in interest. After subtracting the down
payment from the purchase price, you are left with the
amount you have to borrow– the principal. This will be the amount of
money borrowed from a lender to make the purchase. Lenders charge interest
on what you borrow. Rates are determined by factors
such as down payment, length of loan, and credit score. The higher the interest,
the more you pay per month. The length of time you
have to pay off your loan will affect your monthly payment
and the total cost of the car. Because you pay off
short-term loans faster, you end up paying less
interest on the loan. These are one-time fees you pay
for the right to the vehicle. You have the option of
financing these fees along with your loan, but you
should try to pay separately if possible to reduce the amount
of interest you’ll have to pay. So far, we’ve just
discussed purchase costs, but there are other
factors to consider. Make sure you research
the average maintenance costs before purchasing,
or compare warranties on new cars which will
cover many maintenance issues for a time. Some local jurisdictions apply
an annual personal property tax to vehicles. Know your state’s rules
and budget accordingly. Auto insurance is
required in all states, but the amount of
coverage you need varies. Get some quotes before you buy. Make sure you’re aware of
the total cost of your car over the life of the loan. Remember, even if the monthly
payment seems affordable, you might be paying
more than you think. Keep this in mind as you
purchase your next vehicle, and you’ll be equipped to
make the right choice for you and your budget.

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