Picture this: You’ve just graduated college. It’s time to buy a car and you have never made a big purchase on your own. You see all of the beautiful new cars and are hypnotized by all of the cool features. Your mind is made up. You decide you must have a new car. You sign on the dotted line, get the keys, and you are the proud new owner of a beautiful new car.
That was me almost 5 years ago. I finally paid off my car September 2017.
Note: My car is a 2013 Hyundai Tucson so I mean it could be a lot worse. At least I didn’t buy a new BMW or Mercedes.
If I could go back in time I would buy a car that is 1-2 years old with low mileage, but I cannot change the past. I love my car. We have gone on many road trips together. I don’t regret the purchase but I wouldn’t do it again. Most people know that you should buy a used car. If you are someone like me who thinks a new car is a great investment and you’ve got to have one please don’t do it. This is why I recommend buying a used car:
A new car is not an investment. It will lose as much as 19% of its value within its first year of ownership. If you bought a new car for $25,000 your car could be worth about $20,250 after one year! The rate of depreciation increases each year. This is insane!! Just think if you bought a car that is one year old you could pay around $20K instead of $25K and save $5,000! Imagine if you invested that $5,000. That is a great start to your retirement fund! There are so many things you could do with that extra money.
If you buy a car that is few years old with low mileage, most people will have no idea you bought a used car (it might still have that new car smell). You might even be able to afford some fancy features you wouldn’t be able to if you bought the car new!
Also, the car shouldn’t have a lot of maintenance needs right away so you won’t need to invest money into tires, brakes, engine coolant, etc. Trust me car maintenance costs add up! Today I spent $150 on an engine coolant flush.
If you can afford to buy a car in cash (even if it isn’t your dream car), that is your best option. If you cannot and need a car right now make sure you consider how much you SHOULD spend on a payment not how much you CAN spend. Just because you can afford it, doesn’t mean you should buy that car. I could afford a $500 car payment right now but that doesn’t mean it is smart. I wouldn’t be able to save for my wedding, save for an emergency, or go on trips. Your monthly payments will be significantly lower with a used car (as long as your credit score is high).Instead of a $500 car payment, you can find a low mileage used car for $200-$250 a month. That is saving $150-$200 a month on car payments!
TIP: You can start saving some of that extra money for car maintenance in the future because that adds up fast. I had to buy new tires last April and new brakes last May and that got very expensive. I had money saved so I didn’t go into debt paying for that.
If you buy a used car (within your budget), you will own the car a lot faster. You might be able to pay for it in cash (which is wonderful) or you might have a loan but you will be able to pay it off sooner. It is a such a great feeling when you own the car. It is yours and no one can take it from you. That money you spent paying for your car you can put toward another goal like paying down debt or your retirement fund.
If you need help creating a budget so you can start saving for a car, make sure to check out my friend Sami’s Course Your Sunny Money Method. She walks you through creating a budget, setting goals, and managing your money. She is giving my readers $10 off the course so make sure to check it out!
Buying a car is a very lengthy process. You must decide on a budget, research cars, test drive cars, negotiate, the list goes on and on. Below are my 8 tips for buying a car, new or used (preferably used after reading this post).
Tips for Buying a Car:
- Find Out How Much You Can Afford: Calculate the maximum monthly payment you want to spend or if you are paying in cash the maximum total amount you want to spend.
- Research the Right Car: Make sure you find a car that fits your needs (long car trips, 4 kids, great gas mileage).
- Take Advantage of the Internet: There are so many reviews & helpful sites on the internet. Check out the Kelley Blue Book (click here) to price new/used cars & see the value of your current car.
- Get a Safety & History Report Before You Buy: It is important to know if the car has had any repairs, recalls, maintenance, or discrepancies. This will help you make sure you are not overpaying. You can get the car checked by a trusted mechanic to make sure everything looks good.
- Conduct a Walk-Around and a Test-Drive: Make sure the car is what you are looking for and nothing is wrong.
- Make Sure You Know the Total Price: There could be many hidden costs factored into the total price that they might not mention. This includes taxes, car preparation and delivery fees, and dealership costs. Also, consider registration fees.
- Check Your Insurance Rates: Make sure to get an insurance estimate for the car you are thinking of buying. This way you will know if your insurance will go up. You might need to add that increase to your budget.
- Negotiate: Have in mind the maximum you are willing to pay and make sure your first offer is lower. This gives you room to negotiate. If you are paying in cash or putting down a large cash deposit, then you have a lot of room to negotiate!
What are some of your tips for buying a car? Did you buy a new or used car?