Buying a car definitely takes a good bit of time and effort. It’s a big purchase and, if you’re like us, you want to get the most bang for your buck. Both of our cars are still running pretty well, but we know that they won’t last forever, so we’ve been thinking ahead.
At some point we’re going to have to replace them, so we opened a savings account specifically for a new car. Even though we hope to put off the purchase as long as possible, we want to prepare now for the inevitable purchase.
What’s your budget and time frame?
The biggest factor for most people when deciding whether or not to buy a new car, as well as which one to get, is their budget. You have to first determine how much you can afford, and then whether or not you’ll be able to buy it with cash, or if you’ll have to take out a loan.
Having no car payments is great for your monthly budget, so don’t just assume that you should go for a new car loan like many people do. If you are looking at making car payments, you should plan on making a nice sized down payment to minimize your monthly obligation.
If you already own a car, you have two options, and each has its own pros and cons.
- You can drive your current car until it completely dies. This option can give you some more time to build up your car fund. The downside is that you won’t get much (if anything) in return for your current car.
- You can buy another car sooner and sell your old car. This option may give you some more money than the first (depending on the condition of your car), but it also means you’ll have to buy a new vehicle much sooner.
In our case, we’re planning on driving our cars for at least a few more years. We’d like to build up our car replacement fund up to an adequate level instead of having to borrow a bunch right now.
What to look for in your next car?
Before getting into the new vs. used debate, you should have a list of desirable features in mind for your next car. This list should include both deal-breakers and preferences. Some factors to consider include:
- Manual vs. automatic transmission
- Coupe vs. sedan vs. SUV
- Passenger and cargo capacity
- Engine size
- 2WD vs. 4WD
- Standard vs. hybrid drivetrain
- Historical reliability
- GPS, Onstar, entertainment system, etc.
Using resources like Consumer Reports and Edmunds can help you determine which cars fit your needs. Regardless of where you stand on the above list, you should always consider the total cost of ownership on the various makes and models.
Now that you have an idea of the type of car you want, you can decide whether you should get a new or used model.
Buying new vs. used
Many personal finance bloggers, including myself, have written about the financial virtues of buying used vs. getting a new car. I’ve come to learn, however, that it’s not always as clear cut as you might think.
You should really weigh all your factors when looking at buying either new or used. How long do you plan on keeping your next car? If you’ll only be keeping it for 3-4 years, then why lose all that money on depreciation with a new car? If, on the other hand, you plan on owning it for the life of the car, then this becomes less of an issue.
Another factor to consider is the historical rate of depreciation for your desired make/model. Some cars depreciate rapidly whereas others depreciate very slowly. In the former case, you’ll likely do better with a late model used car. In the latter case, you can get the peace of mind that comes with a new car purchase without paying a ton of extra money.
After you’ve gone ahead and decided on the car that you want, you should check out the series that Nickel wrote about getting the best deal. You can save a lot of money by following his tips.
- Part I of “Buying a New Car”
- Part II of “Buying a New Car”
- Part III of “Buying a New Car”
- Part IV of “Buying a New Car”
Your thoughts and tips on buying a car
I’d love to hear your take on buying a car. Have you purchased a new (or new to you) car recently? If so, what factors did you consider when shopping? Did you buy new or used? Why? And do you have any tips for getting a great deal?