Many college students dream of having their own wheels to zoom around town. And there are real advantages to owning a car. It’s a good way to build a credit rating, something you will need when you buy a house or even when you apply for a job. It may even be a practical necessity if you go to a suburban school or have a job off-campus, not to mention the convenience for getting to and from extra-curricular activities. In fact, a survey by the Independent Insurance Agents of America (IIAA) found that almost 70 percent of college students have a car. But the real costs of owning a car may leave you hugging the bus driver.
- Purchase cost. Many students may be prompted by financial constraints to buy an older used car. But while older cars may be less expensive up front, they’ll likely have greater long-term maintenance costs. A new car, still under warranty, should cost less to maintain but will cost more up-front. And, if you get financing from a dealer or borrow money from a financial institution, you may pay a higher interest rate because you have a limited credit rating, or the amount of your student loans classifies you as a high risk. Shop around for the best rate before signing on the dotted line. Car manufacturers often offer special discounts on new cars for first-time buyers or recent graduates.
- Insurance. Staying under your parents’ policy is often the most economical option. But once you own your own car, your insurance may have to be transferred from your parents’ plan to your own, and your premiums will jump. Insuring your car could cost you several thousand dollars a year, depending on the type of car, the student’s driving record, age and where he or she drives. Drivers under the age of 25, particularly males, pay the highest premiums of any age group except those older than 70. That’s because young drivers have the highest rate of accidents and legal infractions, so insurers place them in the highest risk category. According to the IIAA, one in 10 college students causes an auto accident and one in four gets a ticket. Your premiums may increase significantly if you receive a ticket or cause an accident, so drive safely. If you plan to own a sports car and live close to a large city, expect to pay even more. The good news is there are often discounts for students who have taken a driver’s education course or who sustain good grades. And once you reach 25, your premiums generally decrease by 10 to 20 percent. Getting married may also bring you a lower rate.
- Running costs. These include things like regular tune-ups and oil changes, gas, license plate renewal and parking. Parking on campus is often limited and a yearly pass may cost hundreds of dollars. In addition, some colleges may not let you have a car at all, particularly if you are a first-year student. Even if you live off-campus, parking may be restricted and expensive.
- Responsibility. Once you have a car, your friends may see you as a free ride and you may feel more like a chauffeur than an independent adult. You may also become the default designated driver, meaning you take on the responsibility of making sure your friends get home safely. On the bright side, you may become more popular...
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