If you are in the market for a more comfortable car to drive, you may want to take a closer look at luxury cars. But, before you jump headfirst into the world of expensive luxury cars, It’s essential you know what you are getting into.
Luxury cars are more prevalent than you think
You may notice the word “luxury” in your search for a new car. But what exactly does the luxury distinction mean for car industry?
According to Certified Autoplex, “To be considered a luxury car, the vehicle must have high-end features that go above and beyond the average necessities…the term luxury is used to categorize vehicles that are equipped with better performance capabilities, lavish interiors, and all the latest safety and technology features.”
Some of the features may included a heated steering wheel, advanced entertainment systems, water-resistant windows, automatic safety features, and integrated seat massagers, just to name a few.
In the past, brands such as Mercedes were known as luxury brands. But, in recent years, you can find luxury models of some mainstream brands, such as Toyota and Honda.
Don’t forget this when budgeting for an expensive luxury car
Buying a new car or a new-to-you car can be costly. You have to factor in the cost of the car payment, gas, maintenance, auto insurance, and more.
Unfortunately, there is one thing customers often forget about when buying an expensive luxury car. According to Carzing, “Buying a car isn’t just limited to the car payment. Many states charge sales tax on car purchases, and, in some cases, these taxes can’t be rolled into the loan.”
These taxes are also often not a one-and-done situation, they are reoccurring. You need to pay your luxury car taxes every year. So, it is something to consider when budgeting for a new car.
According to Nerd Wallet, these taxes are between 5% and 10% and may include state, county, and local taxes.
Make sure you can afford your expensive luxury car
When in the market for a new vehicle, you must determine how much of a new car you can afford.
Financial experts give a good rule of thumb for figuring out how much car you can afford. They suggest that car buyers should not spend more than 10% of their take-home pay on their car loan payments. Car buyers should also not spend more than 20% of total car expenses. This includes gas, insurance, repairs, and maintenance.
Be sure you are using take-home pay when figuring out how much of a loan payment you can make. Take-home pay is the amount you have after taxes are removed from your salary.
A more extended loan period will give you a smaller payment and more interest, while a shorter loan period will increase your loan amount, but give you less interest to pay over time. Figure out how much you can afford, how long it will take to pay off, and how much interest you are willing to pay for your dream car.
Once you know how much you can afford every month, you look into how much you can borrow. This will be determined based on your credit score, loan term, and whether or not you buy used or new.
Don’t forget that when looking into your total car price, you need to include quite a few crucial items. Don’t forget sales tax and fees. Some of these extra fees can also include registration fees and documentation fees. Also, it is essential to not forget the finance products you want to buy, such as GAP or an extended-warranty
When embarking on your car-buying journey, a good plan is to set your maximum price below the total amount you can afford. This will leave room for the sneaky extra fees to slip in, and you remain under budget.