Morning all! Today I have a guest post from Jason over at Work Save Live. Enjoy!
Buying a car means a significant investment of your time and your financial resources. Your time investment involves doing the necessary research to ensure you get the best possible car in your budget range. Your financial resource investment involves handing over your hard-earned dollars for what you hope is a quality vehicle.
Know Your Options
The first thing you need to know is the many options you have for buying a car. You may engage in a transaction with a family member, relative, or friend who desires to sell their vehicle. You may go straight to a major dealership, associated with Ford, General Motors, Chrysler, or another automaker to obtain a new or used vehicle.
Furthermore, you may look into buying a car from a dealer or you may call on a private seller – someone you don’t know who’s placed an advertisement in a classified such as Craigslist. On top of all that, you may consider the rent to buy option and/or similar programs that car rental companies offer.
Therefore, knowledge is power when it comes to purchasing your next vehicle. Having an array of options, and understanding those options thoroughly, gives you the best chance of making the right purchasing decision.
Know Your Budget
The second thing you need to know is your exact budget. Assuming you follow the advice above, you know where you can go to buy your vehicle. Now you need to determine precisely how much you can afford to spend. It’s very easy to go off budget when you don’t have a pre-determined one. Furthermore, the allure of vehicle extras you may not really need can cause you to overspend THOUSANDS of dollars.
Know What You’re Getting Into
The next thing you need to know is the total cost of car ownership. This involves calculating all costs you will incur in addition to the actual purchase price. When you have a good idea of the car you want, consider insurance costs, fuel costs, and costs involved with maintaining the car for years to come.
Consider what general maintenance costs will be in a year (an approximation) – do some research on Consumer Reports or Edmunds to get a good idea. Consider the ease of and cost of obtaining parts, especially if you’re buying a unique foreign or specialty vehicle. Consider interest rates on car loans as well, and shop for the best deals online and in-person at dealerships and financial institutions.
Moreover, consider storage costs. Is the car you’re buying going to be a summer vehicle, to be stored elsewhere in the off-season. If you don’t have a garage, will the major vehicle purchase you’re making compel you to invest in a garage for security, safety and weather reasons?
Know the Discounts
An additional thing to know is the rebates and discounts (buying incentives) available. Research what reputable dealers are offering and take advantage of the best available. Many auto rebates the last few years are in the $3,000-$4,000 range for new cars. A number of dealers offer very low financing as well (assuming you have great credit).
Buying a car is a major decision that has an effect on other areas of your overall personal budget. Make sure you invest the time in researching the best vehicle possible. Obtain the best ROI when it comes to your purchase through considering the above tips. Remember, your next car is only as good as the due diligence you put into obtaining it.
What other tips do you have when looking for a new car?
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Aren’t you popular with the guest posts today Jason!? For me, buying a car is all about the economy and ongoing maintenance costs…
Savvy Scot recently posted..Planning Our 2013 Holiday to Mexico
I’d say that we are on the same page SS! Ongoing costs is the primary reason we bout our Accord and Camry.
Jason @ WSL recently posted..FreeTaxUSA – Review and Analysis by a Tax Accountant
I will be in the market very soon for a new car. I care a lot about the brand and how reliable the brand is. My last car wasn’t that “cool” of a car, but it definitely saved me money because I’ve had very few maintenance issues.
DC @ Young Adult Money recently posted..5 Ways to Invest in Yourself
I’m all about the brand as well but my concern is that the market/quality changes over time. Are you relying on brands that were reliable 10 years ago? If so, you might be missing out on the new/cheaper/more reliable brand.
Jason @ WSL recently posted..FreeTaxUSA – Review and Analysis by a Tax Accountant
Safety is something to consider when purchasing a car. What is its rating? This is also important.
Mackenzie recently posted..Would You Spend Money On It?
Great tips, Jason! I’ve been involved in the automotive and auto finance industry for a few years, and here are a few good rules of thumb: devote only 18-20% of our monthly budget for TOTAL transportation expenses. The average car buyer spends 11% of their income on car payments. A healthier figure is much lower, just 5-8%, and finance for the shortest term possible to minimize your total interst. And some of the hardcore frugalites will tell you never to finance a vehicle, and never invest more than 10% of your GROSS annual income on a car. For some of us, that means a pretty cheap ride. But still, these are all good figures to keep in mind.
Taylor @ Repaid.org recently posted..The Impact Of The Fiscal Cliff On The Average Joe
Those are all great tips and interesting figures! We’ve personally opted to pay for all of our cars in cash so the percentage in terms of monthly budget doesn’t apply for us. Saying that, we definitely have gone over the 10% of the gross annual income.
Jason recently posted..FreeTaxUSA – Review and Analysis by a Tax Accountant
Dealer Demos can be a good deal as well if you are looking for a newer car but don’t want brand new. I hope I don’t need one for a while.
Kim@Eyesonthedollar recently posted..How to Retire in Ten Years, Regardless of Your Age
I’d never thought of that before! We personally used Hertz Rent2Buy which was a great way to get a newer car for an exceptionally cheap price (compared to other makes/models like it).
Jason recently posted..FreeTaxUSA – Review and Analysis by a Tax Accountant
I forgot to tell you this before, Jason, but I love the fact that the pic of the car on your CarMax article looks like an Aston Martin! Not many of those at CarMax! Ha! You must have been cracking up as you added that pic. Good stuff here. Thanks.
AverageJoe recently posted..How Successful People Accomplish More – Two Guys and Your Money 025
LOL! That was totally intentionally. You have to dream big, Joe.
Jason recently posted..FreeTaxUSA – Review and Analysis by a Tax Accountant
Talk to a car guy. Tell them what model you are considering and they will tell you what they know about it, if it’s known to have problems, or is generally reliable.
Edward Antrobus recently posted..Do’s and Don’ts of Free Wifi
We are just changing cars. The big diffuculty is getting rid of the old one so it will probably go to a cash sales website early next week. Our new car is a contract hire vehicle which we will get at the beginning of March (a registration changeover here in the UK).
John@MoneyPrinciple recently posted..January – Time To Get Financially Fit
I’d say consider the difference between what you need and what you want. And then focus on the former, what you need. We need a car that’s safe, reliable, can get us from point A to point B, and that’s reasonably comfortable. We don’t need a cool brand name which is a status symbol, and we don’t need to feel good about ourselves because of the car we drive. Thinking with this mindset up front can help mute car costs.
Digital Personal Finance recently posted..How Often Do You Upgrade Your Phone?
I think if you’re buying new these days its a pretty level playing field out there in terms of quality and reliability. The most important part of car shopping is to research, know exactly what you want and know everything you can about the car you’re going to buy before you ever set foot in a dealership or contact a private seller.
The First Million is the Hardest recently posted..Do You Really Need A Financial Advisor?
Great advice and I couldn’t really have said it better myself. While there are some benefits to having a new car I’d much prefer to buy 2-4 year old used car.
Jason recently posted..FreeTaxUSA – Review and Analysis by a Tax Accountant
I am all about how the car will hold up. Since I work on cars for my hobby, I know which ones usually last and what to look for when I purchase cars. I have negotiated a lot of money off of asking price because I know my way around an engine compartment.
Debt Roundup recently posted..Overspending in America – The Sad Truth
One tip I would have to add is don’t be afraid to walk away if you’re not getting the deal you want. A lot of times if your willing watch market trends and you know that dealerships are not moving a lot of cars you may be able to snatch a better deal. On top of that I know that if you can walk into a deal with cash you may be to talk them down even lower. Great article Jason.
Chris, you’re right on with the part about walking away! That actually applies to any negotiation for any product/service that you’re buying. If you’re already bought the vehicle in your mind and you don’t maintain walk-away power, then you’ve lost the battle and really hurt your chances to get a deal.
Jason @ WSL recently posted..Tips to Save Money on your Cable Bill
I paid cash for my vehicle but I made sure that I did my research and knew what I was getting into. It’s been 4 years now and it’s all systems go, and I’m happy with my investment so far.
Canadian Budget Binder recently posted..The Pros and Cons of Homeschooling In Canada Part 2 of 2
Knowing what type of car works for your situation is also very important. My wife had a sports car when she was younger. However, she didn’t take into consideration how poor they are in snow. When you live in the north, that’s a pretty big factor. She couldn’t drive it when it snowed really bad so I would drop her off before I went to work.
Now she has a basic inexpensive model and couldn’t be happier. It drives much better in the snow.
Justin@TheFrugalPath recently posted..Improve Your Financial Situation One Step at a Time
I would like to add a few things to your post on buying a car. This really applies if your buying a car from a dealer, new or used. Don’t fall into the trap of revealing what your desired monthly payment is. The salesperson will try to put you into a vehicle that costs more than what you want and their “business” will play with the financing to make it fit your budget. Know exactly how much your willing to spend on the vehicle and arrange for the financing that you want ahead of time before ever looking at a vehicle (Of course it’s far better if you can buy one for cash but that isn’t a reality for many of us).
One other tactic I’ve used when buying a car is time. I bought a vehicle a few years ago and the negotiation took less than a half hour! I had found the vehicle on Craigslist, went in during lunch time, test drove it then came back and gave the salesman my offer and told him I had 5 minutes or I would be late to work. He went to the “tower” and amazingly enough came back and told me they were accepting my offer! I went back later that evening to finish the transaction and drove the vehicle home that day!
Jose recently posted..Investing For Financial Independence – Part Two – Stocks, Bonds and Mutual Funds
We just sold our car (in just two hrs of posting, I still can’t believe it). When we were buying a car, we were most concerned about the safety and the cost of maintenance. We went with a new car mainly because I couldn’t find a mechanic I could trust (we were new to the city and it was our first car in the US).
Suba recently posted..Make more money: 9 reasons why you are NOT earning more money
congrats on the sale!
I think the best is to focus on your budget, market trends, and your requirments. Based on this information, you can contact to any reliable auto dealer to make a purchase of a car.
It remains unclear for the buyer to pick up which car finance offer till end.
great opportunity!