Tips for Buying a Car

One of the biggest and most exciting purchases you’ll make in life is a car.  It’s very important to do your research and plan ahead before making this significant financial commitment, so here are some important “musts” when buying a vehicle:

Determine how much you can comfortably afford
Lenders and dealers may offer to loan you more money for a more expensive car than you need and can afford.  Always follow the 20-4-10 Rule to ensure you’re not stretching your budget in order to obtain your “dream” car:
  • 20 percent down
  • Financing that last no longer than four years
  • Principal, interest, and insurance that doesn’t exceed 10 percent of your gross household income
Decide New vs. Used
If you plan on keeping your car for a long time, you may benefit from buying a new car.  However, if you think you’re only going to drive it for five years or less, a used car with low mileage might be a better option.
  • Used cars are cheaper to buy initially, but have higher maintenance costs
  • Don’t assume a used “luxury” car is better than a standard model with fewer miles
  • Most cars will get 150,000 to 200,000 miles- generally the lower the miles, the longer the car will last
Negotiate the price and trade-ins
Remember: the sticker price on the car is worthless!  Car dealers typically price the car higher than they are willing to sell it for because they assume buyers will negotiate the price.
  • Bring your Kelley Blue Book printout to show you’ve done research on the market price for the car
  • Negotiate the sale price of the car you want to buy first without telling the salesman you are interested in trading in your old car
  • Once you have a firm sale price, you can start negotiating the price of your trade-in

These are just a few basic (but very important) tips to get you started when buying a car.  Feel free to visit us at the Student Money Management Center on the second floor in the Union for more detailed information and free resources about buying both new and used cars.

Post written by Program Assistant, Amanda Owens