There are many factors that should be considered when it comes to buying a car. Do you need a beater or a luxury vehicle, two seats or 10, electric or gas? Perhaps the greatest question of them all, though, is whether you should buy new or used. There are pros and cons to both options, and ultimately it boils down to personal circumstances and preferences.
With that said, here are some of the primary things that should be taken into consideration when one goes about purchasing a transportation vehicle.
Consider Your Budget
It’s important to start your car-buying journey with the understanding that, regardless of what kind of deal you find, your car will ultimately prove to be an expense and a liability. Cars infamously don’t hold value. In fact, according to Carfax, new cars, in particular, can lose as much as 20% of their value in the first year after purchase, and a car continues to rapidly decline in value after that.
In other words, your car is an expense, whether it’s new or used. With that in mind, make sure to go into your purchase with a budget in mind. Calculate your cash flow and make sure that you know what kind of payment you can afford.
Also, be careful to consider long-term costs and short-term costs. How much money can you put down on a vehicle today? How much can you pay on a monthly basis? How long of a loan can you reasonably set up? It’s wise to remember the 20/4/10 rule: put 20% down, take out a loan for no more than four years, and make sure your total monthly car expenses don’t add up to more than 10% of your gross income.
If you find that your budget is tight, you can also look for other areas of spending to cut back on. For instance, if you drop several thousand dollars a year on vacations, you can get a cheap RV and go on vacations for pennies on the dollar, thus freeing up money for a monthly car payment.
Remember Price Versus Value
As you go about sorting through your budget, remember that there are two sides to car buying finances. The price of the car is important to consider. Can you afford a $40,000 new car? What about a $15,000 used car?
Separately, though, make sure to consider value. That is, what are you getting for your money — regardless of if your car is new or used? For instance, if a car is worth $40,000 but you spend $45,000 on it, that’s a bad value. If a used car is worth $15,000 and you spend $12,000 on it, that’s a good value. Use tools like Kelley Blue Book and Edmunds to understand the value of the vehicles that you’re considering.
Do Your Research Beforehand
Research is always critical when deciding between a new and used car. If you’re going with a used car, you’re going to want to study how to look for the signs of a bad repair and ensure that you have a mechanic ready to check the car.
If you get a new car, though, you still want to do your homework. Make sure to see what a fair price is, what warranties are available, and if you can find any sales or specials before you shop.
Do You Want Maintenance or Repairs?
When debating new or used cars, make sure to consider whether you want to deal with repairs or not. While a used car may be cheaper, you also will likely end up investing more money in repairs down the road. Remember that you’ll still need to budget for maintenance either way, though.
Think About Reliability
A new car will typically be more reliable than an older one. It’s just common sense. However, take the time to research the dependability of a specific make and model before committing. For instance, you may find a five-year-old car that has a stellar track record, whereas a brand new car may have terrible reliability reviews.
In other words, don’t assume that new automatically means reliable. Take all of the factors into consideration.
Gauge Wants and Needs
Finally, take the time to consider what is a want and what is a need. Five seats to fit your family in the vehicle is a need. A spoiler or a sky blue color are wants. If you separate your wants from your needs, it can be easier to decide if you can compromise on your wants in order to get whatever used car is available to meet your needs or if you absolutely need to opt for a new vehicle right out of the gate.
New or Used? That is the Question.
Whether you’re a parent searching for a larger vehicle, an entrepreneur looking to impress clients with your ride, a college kid hunting for cheap transportation to and from campus, or any other prospective car buyer, make sure to carefully consider your options before you sign onto a new or a used car.
There are plenty of considerations, and each situation is unique. If you start with your budget, gauge wants and needs, and do your research as you go, though, you’ll be able to whittle down your options and ultimately make the choice between a new and a used vehicle.
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