The budget: buy a car

A car is probably the second biggest purchase a person will make in their life, after a house. And there is a parcel things to consider when buying your wheels: Four-wheel drive! New car smell! Sunroof! Bluetooth audio connection so you can blow up Olivia Rodrigo and sing “driving license” while conduct! But there are also important financial considerations to take into account when making such a life-changing purchase.

For many, the price is well worth it: a car is not only a means of transport, it also offers freedom and flexibility. Take Tara, 32, a creative program manager in the FinTech industry, who began to feel trapped in her Hoboken, New Jersey neighborhood during the pandemic. She doesn’t want to be limited by metro lines or bus lines (and wants to hike places with her dog!), So she’s in the market to buy her very first car. In front, two stars of the automobile of A capital letter, Liz Seeligson, Senior Commercial Director, and Courtney West, Divisional Sales Director, share their tips on how Tara can find a great deal on a car purchase with finances in mind.

Tara’s financial overview:

Monthly income before tax: $ 13,354.94
Annual income before tax:
$ 160,000
Average monthly expenses including rent:
$ 4,150
Total debt:
$ 7,500 in credit card bills; $ 91,302 in student loans
Credit score:
741
Your credit score indicates how much you could get on a loan, your interest rate, and what down payment is required. Generally, a higher credit score will result in lower interest rates.

Car Price Range:
$ 23,000 – $ 25,000
Tara wants something that has four-wheel drive, leather seats, good gas mileage, and safety features (like sensors). She wants a crossover or a compact SUV because she likes to be above the ground when she’s driving.

Target monthly car payments:
Less than $ 400
Including monthly cost, insurance, gasoline and parking

Total saved for the car deposit:
$ 5,000

Know how much you can spend and how much you need to spend up front.
One of the first things to do when starting to buy a car is to decide how much you want to spend, how much down payment you want to make, and the monthly payment you’re comfortable with. Down payments can often help you get better financing terms and protect against car depreciation. Traditionally, experts suggest you put 20 percent down when you buy a car, but according to Edmunds, the average amount is closer to 12%. With Tara targeting a car of $ 23,000 to $ 25,000 with $ 5,000 saved for a down payment, she is approaching that 20%.

For a vehicle at this price, Tara will probably have to budget a little more for a monthly payment than the “less than $ 400” she wants. As an alternative, she might consider a cheaper vehicle, a larger down payment, or a longer-term loan. —Liz Seeligson

Try to get a good interest rate.
Interest rate will vary by lender and manufacturer, as well as an individual’s credit score. Look for different vehicles and shop around for these deals. Capital One Auto Navigator is a great tool that will allow you to see specific rates on the cars that interest you. If you’re looking for a zero percent interest rate, they’re usually only offered as an incentive by specific manufacturers on specific vehicles. —LS

Take into account your gas mileage.
Generally speaking, small hybrid cars can get excellent gas mileage, sometimes up to 50 miles per gallon. However, Tara’s lifestyle centers around traveling with your puppy and she wants a bigger car. A hybrid CUV (compact utility vehicle), often referred to as a crossover, still gets excellent gas mileage (up to 41 mpg) and could meet Tara’s every wish. –Courtney West

Don’t forget the additional costs.
Choosing a car and negotiating the sale price is only the first expense. Tara will also need to factor in sales tax, registration fees, dealer fees, and other extras. Once Tara owns the car, she will also have to pay for insurance, gasoline, maintenance and parking, as she lives in the city. These fees will vary depending on Tara’s insurance, the car she chooses and how she uses it. It is important for Tara to do her research and understand the total cost of ownership to make sure it fits within their budget.

By signing on the dotted line, there are some other products (all completely optional) for Tara to consider this will increase her monthly payment, but could save her out of personal expenses later. These products are sold by the reseller. These include an extended warranty, which covers certain repairs after the car’s warranty expires; gap insurance, which covers the difference between what you owe on a car and what it is worth in the event of theft or totalization; and maintenance plans, which can cover things like oil changes and tire rotations. Chat with the dealer to better understand what each of these products covers. —LS

Consider new and used cars.
There are benefits to a new car, including not having to worry about the history of the car, updated technology, and many new cars come with a warranty of at least. three years and 36,000 miles. But there are also some downsides to buying new: Cars typically depreciate by the end of the first year at around 20-30 percent. Not to mention that new cars are currently scarce due to an industry-wide shortage of chips, which is pushing up demand and creating higher than normal prices across the country.

Used cars, on the other hand, generally depreciate more slowly at first, and a well-maintained car can last well over 100,000 miles. Buying used allows you to get more for your money because someone else suffered the initial depreciation. But there are also downsides to buying used: Due to the current shortage of new cars, there is also a higher than normal demand for used cars right now, which makes it harder than never to negotiate much.

Tara must keep all of these factors in mind when making her decision. —CW

Consider losing the sunroof.
Any additional bells and whistles will drive up the price. Choosing the base model of the vehicle you choose could help keep the price down. —CW

Be prepared to discuss the details with the dealer.
Arm yourself with the right information and questions before you go to the dealership. Be upfront and transparent with the dealer about the research you have done on the models you are interested in (refine your list in advance). And don’t be afraid to ask if they will negotiate the price (many will negotiate if they can). Also look for additional fees, which are dealer specific. Also educate yourself on negotiating this. —CW

Avoid getting ripped off.
Okay, so this information seems obvious, but it’s easier said than done. Here are some tips to help you leave the lot feeling like the * proud * new owner of a car, not someone with buyer’s remorse:

  • Make sure you buy from a reputable dealer. Check out the dealer’s website, read their reviews online, and look at their Better Business Bureau rating.
  • Take the VIN (vehicle identification number) and look up the vehicle history on a few sites (paid and free). It’s not entirely comprehensive, but it’s a good check.
  • If you like the car but it looks like it has had body repairs or sounds bad when you drive it, ask if you can take it to an independent diagnostic mechanic before you buy it. —CW

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