Being able to travel by car can help people earn more, spend less, and get better value in their housing. Cars, however, are relatively expensive to purchase and maintain. American households spend, on average, more than $8,000 dollars on car purchases and maintenance each year. Individuals can reduce this transportation expense by making wise purchase decisions.
Whether to Buy
Consider whether alternative transport -- mass transit, cabs, rental cars, or a leased car -- makes sense.
Mass Transit/Rental Alternatives:
Before buying a car, especially a second vehicle, consider whether alternative transport makes sense. Particularly in cities, these alternatives could include mass transit, cabs, and rental cars, or a combination of the three. Most important, estimate the cost of a car and the cost of any alternative. Then ask yourself the question, is the convenience of car ownership worth the price?
If you decide you want to always have a car available, consider leasing as an alternative to ownership. One reason that so many cars are leased is that monthly lease payments are often lower than monthly car payments. But remember that, at the end of the lease period, you won’t own the car. And buying it at the end of a lease may cost you more in total than purchasing it at the outset.
What to Buy
In deciding whether to purchase a new or used car, make certain to estimate the difference in total costs. Cars vary widely in cost. Annual household spending on automotive transportation ranges from hundreds of dollars to tens of thousands of dollars. The exact cost to you depends on factors such the type of car: its age, mileage, and condition; how you finance, insure, and service it; and how many cars you own and how far you drive them.
Which Car Model:
First, think about the types of models that meet your transportation needs and are affordable. Then search the internet and objective publications, such as Consumer Reports and Kelley Blue Book, for information about the features, performance, durability, and costs of the models which interest you. Finally, look over and test drive any of these models.
New or Used:
In deciding whether to purchase a new or used car, make certain to estimate the difference in total costs, not just purchase price, but also depreciation, gas mileage, insurance premiums, finance charges, and likely costs of maintenance and repair. Remember, new cars almost always are more reliable and have superior warranties to used cars but lose 20 to 40 percent of their value when driven off the lot.
How to Buy
At car dealers, the price of the cars and their optional features are almost always negotiable. In fact, most buyers do not pay the manufacturer’s suggested list price (or sticker price). Here’s how to get the best price:
Purchasing a used car is risky in that you often cannot be certain of the condition of the car. Here’s a purchase strategy:
How to Finance
Shop for a loan before buying a car.
If you still want the dealer to finance your car, negotiate.
Finally, remember there is no 3-day right to cancel on car or car financing sales. Be sure you want the car and understand the terms before signing a contract. Do not drive the car off the lot until financing is final.
How to Save for a larger down payment
The larger your down payment, the lower your debt, interest rate, and interest owed. The most effective way to save a larger down payment is to set aside a portion of each paycheck. Ask your bank or credit union to regularly transfer a certain amount from your checking account to your savings account. If you need assistance finding money to save, check out our savings tips and strategies!