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Here’s how to plan your vehicle budget

Calculating a family budget can be difficult. You are juggling all the numbers and all the details, and there are certainly a lot of expenses to take into account. Things become even more complex when we try and calculate our car budget.

car budget, buying a car, planning your car purchase

“The truth is that most people fail to correctly add all the expenses that come with owning or leasing a vehicle. They then end up with too much car for their needs and finances. That’s why it’s important to plan your budget ahead of time”, says a financial services specialist at Mercedes-Benz Ottawa.

Of course, you have taken into account the monthly payment. After all, it will be the most important part of the monthly budget. That said, you also need to add the cost of insurance, which you can estimate easily by contacting your insurance company. Then, you need to add the annual cost of the license plates and driving license, all divided by 12 in order to get a monthly number.

But there are other costs that cannot be overlooked. Your car might be new, it still needs regular servicing. To figure out how much that will cost each year, ask your dealership.

The cost of fuel is also an important consideration. The way to calculate that cost is simple: take the total number of kilometers that you plan to travel, and divide it by 100, then multiply by the consumption rating of your vehicle. A car that you plan to drive 20,000 kilometers a year and which consumes 8 liters for 100 km will therefore need 1,600 liters of gasoline. Multiply that by $ 1,20 (you better put more here than less) and you have your annual fuel expenditure. Divide by 12 and you have your monthly expenditure.

Another calculation is required for tires. To know how much you should set aside monthly, simply take the amount needed for new summer and winter tires (ask your dealership), and figure you will need a new set every 3 years you plan to own the car. Take the total and the divide by the amount of months you plan to own your vehicle.

Here is a small example: if we keep the vehicle five years, we will have to change tires twice (winter and summer so four times total). Estimate $ 1,600 for the tires divided by 60 months of ownership: $ 27 per month.

And finally, you want to make sure you plan for the unexpected. That means adding another 10 % of your total budget for repairs once the warranty is over, possible deductibles, various tickets, and other unexpected fees.

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