When it comes down to the overall costs of monthly expenses, do not forget about one of the more pricey expenses –automobiles.  Whether you are paying for them through lease costs, gas, DMV fees, or insurance, cars are one of the largest expenses. 

When it is time to make the big decision to get a new or used car – how should you decide?  The price tag should not be the only numbers to look at.  There are three categories to a car: buy new, lease, or buy used. 

In short, buying a new car is the most expensive route to take. Insurance will be high, but the price tag is the worst in this scenario. The DMV fees and sales tax alone will be a lot of money out of your pocket right off the bat. DMV fees are very expensive for new cars in the beginning, but they will eventually level off after the first year. Gas may be the cheapest with new cars, as they are now designing them to be more fuel efficient, but the overall costs of paying for the price tag of a new car will be much greater for this route.  After a year, new car payments will settle and become more reasonable. If you plan on keeping a new car for a long time, it may be a good idea to think about investing in a new car if it best fits your lifestyle.  After the first year, the only payments will be for gas, maintenance and repairs, DMV fees, and insurance.

As for leasing a new car, the monthly lease payments don’t seem too bad, but over time they will add up with interest, coming just under or around the same as the price of buying a new car. With leased cars, insurance is generally more expensive than if you were to buy a new car, but still less than the insurance rates on used cars. However, leased cars generally have little or no down payment, as well as low monthly payments and lower sales tax compared to buying new cars. The largest concern for leasing a car is higher insurance and interest that will build over a few years. However, you are also limited to your mileage usage, and this may pose a problem for some.

Buying a used car greatly depends on your lifestyle and budget. Buying a used car will definitely save you money in the pocket (granted, you don’t buy a car that will end up in the repair shop the very next day).  Insurance prices will vary depending on the model, condition, and year of the car, and repairs may be more frequent and with higher costs each passing year on a used car. Insurance for used cars is generally more expensive than buying or leasing a new car, especially if you choose to waive theft and collision and stick just to liability coverage. Used cars are financed at higher rates, but due to a much smaller price tag, payments are made easier and in much shorter time.

To decide whether to buy a new or used car, it is important to figure out the best approach for your budget.  If you have the money to buy or lease a new car, the prices come high right off the bat, but will settle over time.  As for buying used cars, prices come much less in the beginning, but depending on the amount of time and energy you put into the car, prices will build over time.  The greatest factors are the amount of time you want to invest in the car, and the amount of monthly costs you are able to afford – insurance, repairs/maintenance, and monthly payments.