Tips to ensure car costs don’t wreck your budget

The American Automobile Association calculates that it cost an average of $3,100 last year to own and operate a car.

That figure is based on driving 15,000 miles during the year and includes expenses for gas, oil, tires, maintenance and insurance, as well as financing costs to pay an auto loan.

Expenses will vary depending on the kind of car you drive, how frequently you use it and the number of miles you drive.

The Virginia Society of Certified Public Accountants recommends that you shop carefully if you’re in the market for a new car.

The kind of car you purchase and how much you pay for it will affect annual operating costs substantially and may well put a bigger dent in your budget than you planned, the CPAs said.

Before making an offer on the car of your choice, find out the car’s invoice price – the amount the dealer paid for the car. Many auto and consumer magazines publish the dealer’s costs for all makes and models.

The same publications also can help you determine safety and repair records.

To arrive at a fair price, try to negotiate up from the dealer’s cost rather than down from the sticker price.

Don’t let a dealer persuade you to spend more than you can afford.

If you plan to trade in your old car, come to an initial agreement on a purchase price for the new car before negotiating the value of your trade-in, the society said.

The Credit Union National Association advised buyers to shop for a car that fits their individual transportation needs. For example, ask yourself if you will be using the vehicle mostly for single-person commuting or as a general family vehicle. Stick to a car that meets your specific needs.

Calculate the monthly payment you can afford. The credit union group said your monthly auto payment, house payment (or rent) and payments on other debt should not exceed 40 percent of take-home pay.

Don’t overlook the fact that financing an auto loan is a major cost.

Given the high price of new cars today, the CPAs said, most people either turn to a bank or credit union for an Auto Title Loan.

Before selecting a lender, shop around for the lowest annual percentage rate. Then consider how the interest affects the total cost of the car over the life of the loan.

If you decide to finance a new auto through the dealer, the dealer may offer you a choice between a rebate and discount rate on the financing.

In most instances, the CPAs said, the rebate is a better deal. That’s because reducing the amount you actually finance usually reduces your total monthly costs more than lowering your interest rate.

Insuring your car is also vital and can be a considerable cost of ownership.

The CPAs said consumer-advocate researchers have found that automobile insurance companies charge different premiums for similar coverage.

To get the best deal, compare basic coverage carefully, then search out additional opportunities to lower your premiums.

Selecting a larger deductible is the first step in reducing premiums. Dropping comprehensive and collision coverage on an older car also can reduce your insurance cost.

Most companies offer premium discounts for multi-car policies, cars equipped with anti-theft devices, accident-free and violation-free drivers and drivers who car pool. To be sure you’re getting the discounts you’re entitled to, ask your insurer for a complete list of available discounts.

In calculating the cost of owning a car, you must also consider depreciation – the amount by which your car’s value will decline during a specific period. Remember that your car’s value declines more rapidly in the first few years.

To estimate your annual cost for gas, divide the total number of miles you drive in a year by your car’s average miles per gallon, and multiply by the average cost for a gallon of gas.

When computing your cost for oil consumption, add the cost of every oil change, as well as any oil you add between changes.

Maintenance refers to the periodic servicing specified by the manufacturer. Taking the manufacturer’s recommended preventive steps can help you keep your car running properly.

However, even with proper maintenance, your car is likely to need repairs from time to time.

Be sure to get referrals in selecting a car mechanic or auto body shop. Consider looking for a mechanic who is certified by the National Institute of Automotive Excellence, called ASE certification.

In tallying up your automobile costs, don’t forget to add fees for your driver’s license, vehicle registration and safety inspection, as well as what you pay in personal property taxes, tolls and parking over the course of a year.

All of these expenses will fill just that one line called transportation on your overall household budget.