Get the real costs before buying big toys

Whether you’re hooked on the thrill of a motorcycle, jet ski or ATV, or you’re getting closer to nature with a new RV or boat, any one of these big toys will involve a bigger cash outlay than just the ticket price. Before making an offer, take a moment to review your budget to ensure you can swing any one-time costs as well as ongoing expenses.

Room in the budget?

A big toy can make a big dent in your finances. Before buying, consider how much you can afford to spend. For instance, where will the down-payment come from? Do you have a dedicated savings account for the purchase? If you haven’t started a slush fund for this purpose, think about opening one. And just remember, a new toy does not qualify as an emergency, so resist the urge to raid your reserves.

Then, review your monthly budget. Account for all your monthly income, and add up your expenses – from fixed costs such as a mortgage or rent, insurance and debt payments to variable costs including utilities, food, gas and entertainment. What’s left is what you can allocate to your toy on a monthly basis.

Research financing options

Whether you finance your purchase will depend on the cost of your toy and how much you’ve saved up. It may be tempting to use a credit card if your credit limit is high enough, but beware of the associated high interest rates. Banks tend to offer lower rates, but terms will depend on your credit history, and some dealers may offer competitive financing, as well. Be sure to do some research to compare financing costs before signing on the dotted line.

Know your ongoing expenses

If financing comes into play, payments will need to be factored into your monthly budget throughout the term of your loan. Depending on your purchase, you may need to pad your budget to accommodate any combination of the following:

  • Insurance. Insurance may be required for your toy of choice, and policies vary by state. Even if insurance is optional in your state, such as with a jet ski or ATV, it may be wise to secure a policy for extra protection should an accident or injury occur.
  • Licensing and fees. Some purchases may require state licensing to operate, and those licenses may require renewal every few years. Depending on where you go to use your toy, you may also be subject to recreational or usage fees.
  • Maintenance. To ensure top performance and a long life for your toy, it will need regular service and upkeep. If your splurge is a rare sports car, expect mechanics to be harder to find and more expensive due to their level of expertise in this niche. If you have a seasonal toy, like a jet ski or snowmobile, plan for extra costs to prepare the equipment for long-term storage.
  • Specialized gear. While gear for your pursuit may not be a monthly expense, it should be factored into costs at the outset and you may want to learn how frequently it will need to be replaced. Motorcycle riders, for instance, may want to invest in protective gear beyond the requisite helmet: a motor jacket, gloves, boots and even protective pants that protect against abrasion.
  • Storage. Consider where you’ll keep your toy when not in use. If you have a property with ample storage, you’re in luck. If parking it on the street is your plan, check the neighborhood’s covenants, conditions & restrictions or homeowners association rules to ensure you won’t be penalized. You may need to rent space for a monthly fee at an RV park or other facility.
  • Transportation and fuel. Big toys require fuel to operate, and some require ample amounts to make up for their low mileage. Additionally, if you plan to transport your toys, you’ll need to ensure your vehicle is well equipped – such as with a hitch and trailer – and can handle the load.

Managing the urge to splurge

A big splurge can bring a great deal of enjoyment, and the key to feeling financially awesome about it is to take the time to plan for it. If you need assistance developing a budget and a savings strategy, talk to your banker or financial advisor.