Not my parents’ car
This weekend my parents called me, “pleased as punch” (again!) with news that they purchased a (another) new car. If you remember from my previous post, my parents purchased another new car about 6 years ago. Previously my mom was driving a Saturn Vue. Per my step-dad, the Vue needed some pretty expensive maintenance and since Saturn dealers don’t exist anymore, so they decided to purchase another car.
They did their due diligence and decided on a Honda CRV. As I’ve mentioned before my folks are very frugal in almost all aspects of their of their lives. Cars are their one big, “splurge item” and when they buy a car, they want a new one.
I personally prefer to buy used cars and pay in cash (this is what my grandparents have always done and I admire them greatly for it). I certainly don’t fault my parents for buying a new car. There’s nothing wrong with buying a new car (or any other item for that matter), if you can afford it. Sadly, many people get suckered into financing cars they can’t afford. They don’t budget for an upcoming car purchase, and subsequently end up taking out large auto loans with exorbitant interest rates.
They sign on the dotted line and before they realize what’s going on, that, “affordable” monthly payment the salesman promised is now eating up half of their paycheck leaving them feeling overwhelmed and scared. Fortunately, buying a car doesn’t have to be synonymous with accruing debt.
Here are 8 simple tips, passed along from my grandparents, that Eric and I used to buy our (new to us) car on a budget.
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Pay cash:
If you can’t afford to pay cash, seriously consider if you’re overextending yourself. Do you really want to spend $500 a month on a car payment? 2-3 years from now will you still be making the same money? If you plan on having kids will you need a bigger car? My best friend is currently paying a car payment on a car that will be too small for her family (2 kiddos and twins on the way!) in less than 9 months.
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Consider insurance and maintenance:
Make sure you consider car insurance, maintenance, gas costs etc. before buying a car. Depending on your age and sex, and the make and model of the car, your insurance could be hundreds of dollars per month. Also consider the added expense of buying a luxury car. Servicing (at $100/hour and more) and premium gas can really add up.
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Be Realistic About Your Needs:
Seriously consider the type of car that meets your needs. If you won’t be doing any, “off roading” in Atlanta you probably don’t need a 4-wheel drive SUV. Conversely, if you live in rural Maine where you’ll be driving in 12 inches of snow you might want to invest in that 4-wheel drive Subaru. If you live in Manhattan, that Escalade might look super fly on the lot, but just try and parallel that puppy into a spot on Bleecker Street!
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Do Your Homework:
Talk to friends and family about their experiences with their cars. My family has always loved Hondas for their durability, good gas mileage and reliability. Consumer Reports is a good place to find out what makes and models are reliable and require little maintenance. You should also check Kelly Blue Book to find the going price for a used make/model of the car you’re interested in.
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Buy Used:
Don’t let the dealer convince you that it’s too “risky” to buy a used car (yes parents I’m talking to you!). Forgo a huge depreciation in value and keep yourself out of debt by buying used. If you’re purchasing from a private seller have your mechanic check the car before you purchase it. He/she can tell you if the car you have your eye on has any problems that will end up costing you too much money.
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Save First, Buy Later:
Don’t wait until your car dies to start thinking about saving for a new one. If you wait too long to start saving you risk putting yourself in a financial bind. I started saving for a replacement long before my 1993 teal Chevy Cavalier (RIP), overheated and left me stranded on the side of the highway. Thankfully, when she “died”, I didn’t need to finance a new car because I had been saving for a replacement for over a year.
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Make a Budget and Stick to it:
If you have $1,000 to buy a car, don’t browse the pre-owned Mercedes lot. You wouldn’t look at a million dollar home when you have a $300,000 budget, would you? Don’t, “window shop” places you can’t afford. It’s easy to start dreaming about bigger and better, when you’ve seen the top of the line models.
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Ignore Appearance & “Extras”:
Don’t rule out a reliable mini van because it’s unattractive to you. You’re more likely to score a good deal on the less desirable cars on the lot (think school bus yellow, manual windows etc.). Also keep in mind that, Extras = $$$. Remember what life was like before we had automatic door locks, heated seats, backup cameras and sun roofs? We still got around OK, right? I know I did. Bells and whistles are fun, but they aren’t necessary (to me at least).
Bottom line… a car can be a huge budget buster and a big emotional and financial burden if you don’t do proper due diligence. So save some cash in advance, do your homework and keep an open mind about the car’s “look” and features. You can buy a good car with a limited budget, without going into debt.
Image: David Guo