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

Don’t wait until your annual inspections to find out you have a huge car repair bill coming your way. Plan ahead and even out your car expenses on your monthly cash flow. I’ll share some of the big ones to help you get started.

Oil Changes and Tune-Ups

Oil changes are one of the easiest things you can do to help extend the life of your car. Without having them regularly done, you can do damage to your engine.  While conventional wisdom said you should get an oil change every 3,000 miles, manufacturers have suggested you can do it at least every 5,000 miles. So while engines have improved over the years, that doesn’t give you an excuse to skip out on your oil change. If you have the time, you can do it yourself, or if you prefer, you can get a shop to do it for you.

What exactly are tune-ups? It’s preventative care for your fuel and electrical system. You should look at getting tune-ups every 2 years or 30,000 miles- whichever comes first. Here a re few things that are listed for tune-ups:

• Change the air filter
• Replace spark plugs
• Checking the belts
• Replace the PCV

When looking at the schedule for tune-ups everyone recommended looking at your owner’s manual. Some mechanics are treating newer cars like older ones and that could cost you more money.

With tune-ups and oil changes, please also factor in how often you use your car. IF you do a lot of travel and put a ton of wear and tear on your car, you’ll have to check on your car more frequently.

Tires and Batteries

I just had 2 of my tires replaced this week. While it wasn’t cheap, getting new tires is better than having one blow out when you’re driving on the highway. You really don’t want to take chances with your tires. Use the penny test to see if your tires need replacing. Place a penny into the groove of your tire. If you see the stop of Lincoln’s head, go ahead and get that replaced as soon as possible.

Again, it can vary based on your driving style and environmental conditions, but tires can last around 50,000 miles. If you’re not sure how many miles you’ve driven with the tires, at the very least you should replace your tires every 6 years.

If you’ve had to get a jump for your car, you know how annoying it is to have a problem with your battery. Try to get track of when you get your battery. The normal life of a car battery is around 3-4 years, depending on a variety of factors. Whenever you get a tune-up, make sure they check the condition of the battery. They may have to clean the terminals.

Thoughts on Car Maintenance

If you’re still unsure of when you should take care of your car’s maintenance, Edmunds has a tool that will break some of them down based on the car model you have. It also include average prices in your area for these services.

I’d love to hear your thoughts on it. How you keep your car regularly maintained? Do you use a calender to keep track of car repairs or do you just wait until something breaks down?

Some people purchase a home as their first major purchase when they move out of their parent’s house. Some people decide to take a summer long vacation after graduation, and travel to exotic places; their first major purchase becomes the journey of a lifetime that they will never forget. I graduated from university in 2005 and my first major purchase was my brand new Honda Civic.

On June 1, 2007 I drove off the car lot as the proud new owner of a Honda Civic, at 26 years old and over $30,000 later.  In the beginning my car was a novelty, it was the first item that I had ever purchased on my own…with all of my own money.  I had owned a car before, but I had never paid for my own car.  In my early 20’s my father gave me an old Honda Prelude that I drove until I handed it down to my younger sister, who crashed it within 24 hours. 

I did know how to be financially responsible because I had purchased other large items such as a flat screen television and I had also paid for my own mini vacations. I had been supporting myself financially and paying for my own monthly living expenses since I moved out of my parent’s house at 19.  However, my Honda Civic was my first major purchase.

After the novelty of my new car wore off, I quickly learned that my shiny new car was definitely not a smart financial decision…especially for my first major purchase. The day I bought my car I called my father to share the great news of my first major purchase. “Kristina, a car is a money pit.” He responded.  I had a feeling that my father’s advice was correct, but at the time I didn’t care.  I didn’t actually need a car, since I live within walking distance of my work.  I bought it because I felt that a young professional who is 26 years old should have a car.

Even if I over look the fact that I overpaid for my car, the monthly expenses were definitely overpriced.  It wasn’t that I couldn’t afford the $800 per month for my car payment, the insurance, indoor parking in my apartment building, and gas; it was that a Honda Civic is not worth $800 per month…or $30,000.  In September of this year I sold my Honda Civic. Now, I feel that an $800 financial burden has been lifted off of my shoulders. 

Here are 3 major financial lessons that I learned from the financial mistake of my first major purchase:

-       Never buy anything because it seems like the right thing to do.

-       Always weigh the opportunity cost of a major purchase.  Ask yourself is the benefit worth the cost?

-       Always shop around and compare prices. Do not make impulse purchases because usually we end up being overcharged.

(Photo By Gillian )