Often the line between ‘good debt’ and ‘bad debt’ is clear. Good debt will see the money yo borrow be returned to you plus more, so using credit to buy a house or start up a business are both examples. Bad debt on the other hand generally involves spending borrowed money on things you don’t need- or like it’s money you have already earned. Splashing out on new clothes, holidays and eating out on credit are all examples. However sometimes it can be a little more blurred, and buying a car can sometimes be a tricky one. One one hand, if you already have a perfectly good vehicle but simply want to upgrade then this can be a bad move if you have a habit of getting into debt (or are already in debt). However, it can sometimes be an incredibly wise purchase and change your life for the better. It could mean you can look for jobs that are a little further out, improving your career prospects. It could save you money on expensive public transport, and generally make your life much easier- especially if you have kids and other commitments.
If you don’t already own a car, or need to replace a car that’s broken down then taking out used car finance can be seen as ‘good debt’ if you need the vehicle to be able to work and live. With this being said, here are some of the other costs you will need to bear in mind.
If this will be your first car you might be surprised at just how high insurance costs are. Often it’s not the price of the car thats the most expensive thing, but the cost to insure it. If you’re replacing a car that’s no longer usable but have insurance on the vehicle, be sure to check how much it will cost to change the policy over to the car you plan on buying. Even a similar size, model and year can cost significantly more so it’s something you need to be aware of before signing on the dotted line.
Depending on where you live, you may have to pay road tax for your vehicle. This is usually based on the levels of emissions your car produces, older cars will emit more and therefore be more expensive. Newer models will usually be very cheap with hybrids and electric cars having zero road tax. You can check how much you will need to pay online, in some cases it could be worth spending a little more on a newer or more eco friendly car to get this cost down.
This is an obvious one but something many drivers overlook. When cars break down they dont tend to be cheap, so it can be well worth having some savings put aside just in case this happens. Even a few hundred dollars can lessen the blow and get you back on the roads as quickly as possible if the worst were to happen.