Are you getting ready to buy a new car? While making such an expensive purchase can be intimidating, following the right steps and preparing your finances in advance can make finding and buying a car fun. If you’ve thought about replacing your car or buying one for the first time, follow these steps to buy a car you’ll love.
What to know when buying a car
1. Always start with your budget
Before you look for cars, you should look at your bank account. While most of us would want the newest, fanciest, coolest car on the market, that may not be what’s right for our budgets. Look at your savings for a down payment and what you can afford for monthly payments as a starting point.
A higher down payment leads to a lower monthly payment. Planning ahead and saving can help you afford a nicer car or get lower monthly payments. Knowing what you can afford and how it fits into the rest of your budget should guide your purchase decision.
Learn how Payactiv can help you with your budget and savings.
2. Consider needs and wants in a car, truck, or van
Next, consider what you really need in a car, truck, or van. If you’re into pickups, you may want the newest and best in class. But you probably need a reliable, affordable truck that can get you to work and back while safely carrying anything you need in the back.
Outside of safety, which should always be a priority, it’s okay to lower the bar a little bit on features to get the right vehicle for your needs and budget.
3. Pros and cons of new vs. used vehicles
New cars are likely going to be the most reliable and defect-free options on the lot. However, they also see a rapid decline in value when you drive it home for the first time and over the early years of ownership. Late-model used cars often provide a win-win for your budget and your desire for recent features.
Savvy shoppers often buy a recent, used vehicle with relatively low mileage even when they can afford a brand new model. This can easily save you thousands of dollars compared to buying new. Consider what you can do with all of those savings before spending on a new car.
Car in the shop? Learn how Payactiv and Uber can get you where you’re going.
4. Understand the difference between leasing and buying with a loan
When you lease a vehicle, you’re effectively renting the car for a few years instead of buying it. At the end of the lease, you don’t own the car and have to give it back unless you’re willing to pay more to buy the car after the lease.
Buying a car and keeping it for a longer period of time is usually a far better financial deal. Unless you always want to allocate a significant portion of your budget to vehicles and would have bought a new car every two or three years anyway, the better financial decision is to buy with a loan. After you pay the car off, you can keep it payment free for years to come.
5. Focus on the total cost instead of just the monthly payment
At the car dealership, the salesperson will likely show you an offer focused on the monthly payment. Don’t just think about what you can afford to spend each month. Look at the total cost when negotiating and making a deal.
Do plenty of research before you go to the dealership. Consider getting quotes for multiple cars within a hundred miles or so from home. If you expand your search, you may find a similar car at a much better price an hour or so farther away.
Be ready to make a confident car purchase
Outside of a home, a car is likely one of the biggest purchases you’ll ever make. When you research the best car for your needs and fully understand your budget, you can confidently buy the right car for you.
Whether it’s a practical sedan, a utility truck, or a van that can hold the entire family, there’s probably a great car out there waiting for you to bring it home.
Holistic Financial Wellness
Learn how PayActiv measurably reduces employee financial stress and employee turnover.