Originally Posted: Oct 20, 2016
Last Updated: Oct 25, 2016
You’re already coughing up $$$$ to go to college. Can you afford to buy a car too?
Road trips can be an essential part of the college experience, and there’s something to be said for driving to class in the wintertime. But buying a car in college and paying for your education can be an expensive proposition.
We all know that tuition keeps rising everywhere (well, almost everywhere); meanwhile, recent reports show the average transaction price for a new vehicle topped $34,000 in August. It doesn’t take a degree in accounting to know that’s a lot of coin. So how do you afford both? Indeed, there’s a lot to consider when deciding whether you can pay for a car along with your college expenses...
With newer, pricier cars, monthly payments are likely to be your top ongoing expense, especially because those payments include more than just the cost of the car itself. Beyond interest and other fees, new-vehicle buyers, for instance, have to worry about dealer destination charges. These now top $800 for popular subcompacts from brands like Chevy and Honda. Car dealers also will be keen to include extended warranties, paint protection, and other add-ons with your payments. Deciding which of these are worth the money depends on your individual circumstances, so it’s vital to do your homework before buying a car.
The starting price of a car is just the starting point for your budget, though. For example, in all states except for Alaska, Montana, New Hampshire, and Oregon, you’ll have to pay sales tax. It’s usually just a small percentage of the purchase price, but it can add up quickly when you’re spending thousands of dollars. Consider: the average price of even a used vehicle approached $20,000 this summer, and a 3% sales tax would mean an additional $600.
Additional car costs
Other up-front costs to take into account when buying a vehicle include registration and title fees, all just to get your car on the road. You also have to budget for keeping it on the road, like gas, routine maintenance, and perhaps even campus parking fees. Many states will require inspections too.
Then there’s auto insurance, another expense that can make a significant impact on your budget, especially as a college student. However, it’s also one that varies widely based on your location and other factors. Here are a few car insurance rules of thumb:
- Less-expensive, less-powerful cars are the least expensive to insure. True, that may not sound like fun, but neither does getting in over your head with car payments on behalf of a turbo engine.
- More common models are easier to insure. Coverage for hard-to-find parts and expensive labor costs can lead to higher insurance rates.
- Older cars can be more expensive to insure than newer ones. Older cars also tend to have those harder-to-find parts, and they don’t have the same range of safety features as more recent models. Hence, more expensive to insure.
- Mileage also matters. If you’re going to be driving home every weekend, you’ll probably pay more in insurance than if you’re sticking around campus.
All told, expert sources such as Consumer Reports and Quicken indicate that total transportation costs—monthly payments, insurance, gas, parking—should be no more than 8%–10% of your budget. That may be well worth it to you if you need your vehicle to work, class, and back home again.
On the other hand, if you are sticking around campus, or you don’t truly depend on a car, your bank account may be better off without one. That’s the opinion of the team at Kiplinger.com, which recently ranked vehicles as one of the “13 Things College Students Don’t Need” if they’re trying to keep down expenses.
So, is car buying in your future? Or are you too busy, you know, paying for college to fit another expense into your budget? Let us know on social or in the comments below.