Why Paying for a New Car Can Be Tricky (and How Beem Can Help)
Purchasing a new car is usually one of the most significant financial steps for many. The process might seem daunting as the rising prices increase the complexity surrounding this decision.
In November 2024, the average price of a new vehicle in the US was approximately $48,724, marking a 1.5% increase from the previous year, according to Cox Automotive’s market insights report. However, the company also reported that by May 2024, prices had dropped nearly 1% year-over-year to an average of $48,389, due to improved inventory levels and higher dealership incentives.
Other universal challenges include paying for the auto, knowing available financing options, and finding decent car insurance coverage. Fortunately, tools like the Beem Car Insurance Marketplace make it easier to overcome these challenges. It offers one affordable option among many for acquiring car insurance so that you can compare rates based on the coverage you apply for. In this guide, we’ll explore expert tips for navigating the tricky terrain of buying a new car and managing its associated costs, particularly insurance.
Read related blog: Can You Use a Personal Loan to Buy a Car?
How to Determine the Right Price for Your New Car
Budgeting for Your New Car
Sticking to a realistic budget is essential when determining how much to pay for a new car. The general rule of thumb for car financing is the 20/4/10 rule. This rule helps you determine a reasonable loan amount and down payment based on your income and long-term financial stability.
- 20% Down Payment: Aim to put down at least 20% of the car’s purchase price. This will reduce your monthly payment and the total amount of interest you’ll pay over the life of the loan.
- 4-Year Loan: The loan term should not exceed four years. While longer loan terms may seem appealing due to smaller monthly payments, they can cost you more in interest and may become more expensive in the long run.
- 10% of Monthly Income: Your car expenses—including loan payments, insurance, maintenance, and fuel—should ideally not exceed 10% of your monthly income.
Additionally, don’t forget to factor in trade-ins. If you have a car to trade in, this can lower the price of the new vehicle, which may help you meet your budget more easily. Be sure to get a fair appraisal for your trade-in vehicle to maximize its value toward your new car purchase.
Understanding Car Insurance Costs for a New Car
Car insurance is another significant cost associated with purchasing a new vehicle. Premiums can vary greatly based on several factors, including the make and model of the car, your driving history, location, and the level of coverage you choose.
Newer cars, for example, typically cost more to insure than used cars. This is because they are worth more, and insurance companies may assume that repairs or replacement costs will be higher in the event of an accident. Sports cars or high-end models also tend to have higher premiums due to their increased risk of theft or damage.
While you’re shopping for a new car, don’t forget to get an insurance quote as well. Many car dealerships or salespeople will offer insurance packages, but these may not always be the most cost-effective options. Beem’s Car Insurance Marketplace is a great tool to find competitive rates on new car insurance, allowing you to compare different providers and tailor your policy to your needs.
Read related blog: Can you Buy a Car With a Check?
Beem’s Car Insurance Marketplace vs. Traditional Options
Unique Features of Beem’s Marketplace
Beem’s Car Insurance Marketplace is designed to simplify the process of finding and comparing car insurance. Traditional insurance options often require phone calls, multiple visits to agents, and tedious paperwork. With Beem, the process is streamlined through an easy-to-use platform where you can:
- Compare Auto Insurance Quotes: Beem’s lets you quickly compare rates from multiple providers, ensuring you get the best deal.
- Exclusive Discounts and Personalized Coverage: The platform offers exclusive discounts, helping you save money while ensuring you have the right level of coverage for your new car. The platform also lets you customize your insurance policy based on your specific needs and preferences.
- Easy Integration with Car Buying: Beem’s marketplace simplifies obtaining insurance quotes while considering different car models. This allows you to factor in insurance costs when making your final decision, so you’re not caught off guard later.
Beem’s Car Insurance Marketplace takes the guesswork out of shopping for car insurance, making navigating the complexities of car buying and protection easier.
Traditional Insurance Options: Pros and Cons
While traditional methods of shopping for car insurance—such as calling individual insurance companies or visiting local agents—can work, they come with certain drawbacks:
- Time-Consuming: Traditional methods require you to spend time gathering quotes from different insurance providers. You might also have to meet with agents in person or wait on hold for long periods.
- Limited Options: By working with a single insurance agent or provider, you may not have access to the best deals or a wide variety of coverage options. Shopping around for the best rates can be challenging when you’re relying on one or two providers.
- Potential for Missed Discounts: Without a robust comparison tool like Beem’s platform, you might miss out on valuable discounts or specialized offers that could lower your premiums.
In contrast, Beem’s online platform makes it simple to compare different quotes and customize your coverage, all while saving time and effort.
Read related blog: How to Save Money for a Car
Common Pitfalls When Shopping for a New Car and Insurance
Overpaying for Car Insurance
One of the biggest risks when shopping for a new car and insurance is overpaying for your insurance policy. If you don’t do your research or fail to compare different providers, you could pay more than necessary for coverage.
It’s also important to ensure that you’re not underinsured. While it might be tempting to opt for the cheapest policy, this could leave you vulnerable in the event of an accident or claim. Beem’s platform helps mitigate this risk by providing transparent quotes, allowing you to see exactly what each policy covers and compare them side by side.
Hidden Costs of Owning a New Car
When budgeting for a new car, don’t forget about the hidden costs that come with ownership. In addition to the purchase price and insurance, new car owners often overlook the following:
- Maintenance Costs: While new cars typically come with warranties, you’ll still need to budget for routine maintenance such as oil changes, tire rotations, and brake checks. These costs can add up over time, especially if you’re driving a luxury or high-performance vehicle.
- Taxes and Fees: Sales tax, registration fees, and other taxes can significantly increase the cost of buying a new car. Be sure to factor these into your budget.
- Fuel Costs: Fuel costs can vary depending on the make and model of the car you choose. Fuel-efficient cars may save you money in the long run, but performance or luxury cars can lead to higher fuel expenditures.
When setting a budget, it’s essential to consider all these expenses to avoid surprises. Beem’s marketplace also helps you compare insurance rates, aligning with your financial goals and ensuring your monthly payments stay manageable.
Exploring Alternatives to Buying a New Car
While buying a new car is exciting, it’s not always the most practical or affordable option for everyone. There are alternatives to consider, each with its own set of advantages and drawbacks.
Buying Used Cars
Used cars can offer significant savings compared to new cars, especially when you account for depreciation. New cars lose value quickly, typically around 20% in the first year alone, whereas used cars have already gone through that steep depreciation curve. With a used car, you might get a more luxurious or well-equipped vehicle for a fraction of the price of a new model.
Additionally, insurance costs for used cars are usually lower than for new ones, making it a more budget-friendly option overall. Beem’s Car Insurance Marketplace can help you find affordable rates whether you’re buying new or used.
Read related blog: Can a Car be Registered and Insured in Different Names?
Leasing Options
Leasing a car can also be an attractive alternative to purchasing one. Lease payments are often lower than loan payments, and you can drive a new car every few years without worrying about the long-term maintenance costs. However, leasing typically comes with mileage limits and other restrictions, which may not suit everyone.
It’s important to note that insurance requirements for leased cars may be more stringent, as the leasing company will want to ensure the vehicle is fully covered. Beem’s marketplace can help you find competitive rates for leased vehicles, making it easier to manage insurance costs regardless of how you choose to acquire a car.
FAQs About Paying for a New Car and Insurance
How much should I budget for a new car?
When budgeting for a new car, follow the 20/4/10 rule to ensure you’re financially comfortable. Aim for a 20% down payment, a 4-year loan term, and total car expenses no more than 10% of your monthly income.
What factors affect car insurance premiums?
Car insurance premiums are influenced by factors such as the car’s make and model, your driving history, your location, and the level of coverage you select. Beem’s marketplace allows you to compare these factors to find the best rates across different providers.
Is it cheaper to insure a used car than a new one?
Yes, used cars typically cost less to insure than new cars because they are worth less and may have lower repair or replacement costs.
Can I save money by bundling auto insurance with other policies?
Many insurance providers offer discounts when you bundle your auto insurance with home, renters, or other policies. Beem’s platform also offers exclusive bundling discounts, helping you save even more.
How do I get the best rate on new car insurance?
To get the best rate on new car insurance, use Beem’s Car Insurance Marketplace to compare quotes, customize your coverage, and take advantage of exclusive discounts.
Key Takeaways for Smart Car Buying and Insurance Shopping
Buying a new car involves more than just the sticker price. Budgeting carefully, understanding financing options, and securing the right insurance are all essential steps. Beem’s Car Insurance Marketplace simplifies the process of finding affordable insurance, ensuring that your new car is covered without breaking the bank.
Get started today with Beem to lower your car insurance premiums and drive smarter!
