After we purchase our first car but before we drive it off the lot, we must have proof of our monthly car insurance.  When I purchased my first car I was surprised to learn that the dealership wouldn’t hand over the keys to my new Honda until I had proof of my monthly car insurance.  I thought this was a rule enforced by the law, but the dealership must also have a legal obligation. 

Since I work for a financial institution my decision to buy my monthly car insurance was very easy.  However, I did some shopping around (just in case) to compare the prices of monthly car insurance with difference financial institutions and insurance companies.  I was surprised to learn exactly how painful (and what a long process) it is to shop for monthly car insurance.  Here are some questions that we need to ask about our monthly car insurance before buying our first car.

Do I Need To Have Monthly Car Insurance?

The answer is absolutely yes.  It is a law that we must drive with monthly car insurance.  It is called monthly car insurance because the plan is charged on a monthly basis, and it can be cancelled at any time.  The consequence for driving without monthly car insurance can be anything from a monetary fine and suspension of our driver’s license, to repossession of our car and even imprisonment. 

It is a law to have monthly car insurance, but in my opinion it is a worthless expense. Within the 3.5 years that I had my car it was stolen, towed, and vandalized.  All 3 times my insurance company did not cover any of the expenses.  There is a reason that the insurance business is one of the most profitable (if not the most profitable) professions in the business world.  The reason is because there is always a loop hole in our insurance policy, and a reason for insurance companies not to pay.  Insurance companies collect more insurance premiums, than they pay out in insurance claims.  In my opinion insurance companies are like Las Vegas casinos, the house always wins.

How Much Should I Pay for my Monthly Car Insurance?

My brand new Honda Civic was my first car, and therefore I had never shopped around for the cost of monthly car insurance.  My first choice was to go with my employer since I work for a financial institution.  However, like any good consumer I did shop around.  After calling two other insurance companies and getting one online quote, I decided to purchase my monthly car insurance with my employer. It is always important to shop around to ensure that we are getting the best deal possible on our monthly car insurance premiums.  Stick to the rule of three. Always get at least 3 insurance quotes before making a decision.

How Do They Determine My Monthly Car Insurance Premiums?

There are several factors that determine the amount of our monthly car insurance premiums.  The basic factors include our age, sex, the make, model, and year of the car, as well as our driving record.  However, we can receive additional discounts on our monthly car insurance depending on our good credit history, our profession, as well as the other types of insurance policies that we have with the insurance company or financial institution.

Shopping for our monthly car insurance can be a painful and a very long process. However, in the end, it is better to have our monthly car insurance than suffer the consequences for not having it.

There are several things that we should know when learning how to budget for buying our first car.  Buying a car may be our first major purchase. It is important to ask questions and be informed.  I bought my first car in June of 2007; and I later regretted my first major purchase. 

There are several questions that we need to ask while planning our budget when buying our first car.  We need to research which type of car we want to buy.  Factors such as gas mileage, gas consumption, as well as the make and model of car are all important decisions.  However, nothing is more important than our budget when buying our first car. Here are some questions that we should ask when learning how to budget for buying our first car.

How Can I Budget to Buy My First Car?

I did not have a budget when I bought my first car.  I didn’t even know how to budget.  My first car was an impulse purchase, you can rest assure that I will never make that mistake again.  After researching Honda, Mazda, and Toyota I decided to buy a brand new 2007 Honda Civic. I walked into the Honda dealership on my lunch hour, and I came out $31,000 later with a brand new Honda Civic.

My biggest mistake was not having a budget to buy my first car.  I didn’t negotiate the price, I didn’t ask for any extras, and I didn’t walk away.  I accepted the price that was offered, and I signed on the dotted line.  This was a huge mistake.  We should know ahead of time what price we want to pay, and we should leave the car dealership with the best car that fits into our budget.  We should not walk into the dealership with a car in mind and no planned budget, because then we end up overpaying for our first car. 

What Percentage of My Monthly Budget Should Be For My First Car?

It is a standard rule that we should allocate 15% of our monthly income towards the budget for our first car.  These expenses include parking, gas, insurance, as well as monthly car payments. As my income varies depending on the commission I earn, my car budget could be anywhere from 10% to 25% of my monthly income. .

There is another unwritten finance rule that we should budget to spend no more than 15% of our annual income on the purchase of our first car.  I often see the exception to this rule, rather than the application of the 15% rule.

What Expenses Can Not Be in the Budget for My First Car?

I quickly learned that there are several expenses that cannot be in the budget for our first car.  I had to put down a $500 deposit (in cash) to cover the license plates and registration.  This was not mentioned until after I had already signed on the dotted line.  The car was not full of gas when I bought it, there was about a quarter of a tank.  Emergencies, maintenance, and oil changes are all miscellaneous expenses that cannot be in the budget for our first car. These expenses are not regular and are often not a fixed amount; this makes it difficult to budget.

I loved my car while I had it, and I was honestly sad to sell it.  However, I regret not learning how to budget for my first car.  This was a mistake that I will not make a second time.  However, I would buy another Honda.  I loved the model of the 2007 Honda Civic, and the gas consumption was cost efficient. The service at Honda dealerships is great, except for the fact that I totally overpaid for the purchase of my first car.

Photo By Dave7

Today the auto writers over at MSN published an article titled Worst New For 2011 Vehicles.  When I purchased my car I did research the gas mileage, but that’s about it.  Other than that, I purchased my Honda Civic based on the opinions of other Honda drivers, which included my friends and family.  I didn’t read any auto reviews or recommendations, although I wish I did. These years later I definitely regret My First Major Purchase.

Do you own one of the cars that MSN names and the Worst New For 2011 Vehicles?

2011 Infiniti QX56.  This is named as one of the worst new vehicles because of its massive gas consumption.  MSN calls the 2011 Infiniti QX56 a “vulgar and ostentatious status symbol.”

 2011 Scion xB. I admit that I am not a super hip car chick, but I do know a little something about cars.  I had never heard of this car. Although after seeing the picture, I do remember seeing the 2011 Scion xB on the streets. I agree with MSN that the design of this car is not cute; it is definitely not attractive to the eye.

2011 Toyota Avalon.  I personally love the way this car looks, it is classy and modern.  However MSN describes the 2011 Toyota Avalon as a “carrot for pissed of Buick owners.” Of course class comes with a price. For $41,100 you too, can be the proud owner of a 2011 Toyota Avalon.

2011 Ford Fiesta.  This is just a dorky looking little car.  Yes, the price is great at just over $16,000. But please remember, you get what you pay for. I don’t think that a car is the place where we should try and tighten our financial belts.  We need to make smart purchases, especially on an asset that depreciates in value the second we drive away from the car dealership.  However, keep in mind that safety and security do come with a cost.

2011 Infiniti M.  This is the second Infiniti car to be named in MSN’s list of the Worst New for 2011 Vehicles.  However, I don’t agree.  OK, the design is not super snazzy; but I know a lot of people who have an Infiniti and they love it.

2011 Nissan Juke. Did anyone else just ask themselves…what the hell is a Juke? I don’t like the design, and I don’t know a lot of people who are happy with their Nissan purchases.  The price is reasonable at $19,998; but for $5000 more, I feel that we could get a better looking car.

2011 Chevy Volt. This car is being marketed as a fuel efficient electric car.  The gas mileage is great, but the price is not. I know that electric and hybrid cars are generally more expensive than regular cars.  However, this car remarkably resembles the Honda Civic, and at a starting price of $41,000, it is not worth it. 

To view the full list of the Worst New for 2011 Vehicles on MSN click here.

Photo by Gillian