Buying a new, or new to you, car isn’t your typical impulse purchase, but I’ve seen it happen. I’m guilty of rushing to buy a new car myself.
And with Christmas right around the corner, I’m sure a new car is on at least a few people’s wish lists.
I wanted a car for a long time. In my 20s, I had some medical issues that seriously affected my sleep. Having to get up an hour (or more) earlier to wait for a bus only made things harder.
In my mind, getting a car was the solution, but was not something I could afford as a university student.
But then I graduated and started my first full-time career job. Like many new grads, the desire to buy a car quickly moved to the top of my list.
To be honest, the full truth is that I felt like I was entitled to get a new car.
But I worked for a small non-profits arts company where I was overworked and underpaid. The promise of getting a “good” raise after passing my probation period never came.
So after 6 months, I decided that if I also got a part-time job, I could finally afford to buy a car. Which is exactly what I did.
If I Had Stopped Myself From Rushing To Buy A New Car…
Although I wanted to buy a new car for years, did I do any research?
Did I figure out what car best fit my needs and my budget?
Did I price out different financing options or save anything for a down-payment?
No, no and no.
Instead, I went to the bank and asked for a line of credit to buy a used car. When they denied me, I went to a car dealership, who of course bent over backwards to get me financing for a new car.
Which I was driving around a week later.
If I didn’t rush this major purchase, it might have dawned on me sooner that the car loan I signed was for 5 years. And had a $6,000 payment due at the end. Meaning unless something changed for the better, I would have to keep working 2 jobs for those 5 years in order to afford my payments.
(I’m sure I had bought into the hype and convinced myself that this job would be the launching point of a lucrative career, and therefore lucrative income. It was not.)
I also might have realized that I absolutely did not need this car.
For those first 6 months, I walked the whole 10 minutes to work every day.
Sure it sucked to have to walk in the middle of January, but you know what sucks a lot more?
Still having $33,000 of student loan debt today – 10 years after I graduated.
Having a car cost me an average of $525 per month (between the loan payment, insurance, gas, licensing fees and maintenance). And guess what:
Paying $525 a month for 5 years = $31,500
Where could I have better allocated that $31,500 I wonder???
Of course, things in my life changed in those 5 years. Owning a car did eventually become a need and not just a want. But I could have survived those first 3 years just fine without one.
What Should I Have Done Instead?
I should have waited. As simple as that.
I should have sucked it up and kept walking to work, used public transit, and paid for the occasional cab, when needed. Sure cabs are expensive, but spending $25 once a week to do a grocery run would have cost me $425 a month less than owning a car.
I shouldn’t have set myself up to depend on the income from a second job to make ends meet. It should have been a way to make “extra” money to help me get ahead financially and not just stay afloat.
Maybe I shouldn’t have gotten a second job at all, and enjoyed living my life in my late 20s instead of living to work.
At minimum, I should have used those 3 years to actually research cars, save for a down-payment, and focus on paying back my student loan debt.
Learn From My Mistake
If you are a new grad or just starting out your career, rushing to buy a car might also be something you feel you need to do.
Maybe you truly need a car to get to work each day.
Or maybe your old car is showing it’s age, and replacing it makes more financial sense then repairing it. (Which is what happened to me.)
Regardless, please don’t rush it!
Vehicles are expensive, and usually come with monthly payments. If you are in debt or living paycheck to paycheck, that $500 – $700 + a month is huge. Taking on a 5-figure debt is huge.
So please, take your time.
Keep Driving Your Old Car
If you already have a car, keep driving it for as long as you can. (And as long as it’s safe to do so.)
Presumably, you don’t have car payments on this vehicle, so you should be able to afford to spend some money maintaining it. Yes, those repair bills can be high, but a new car payment is a lot higher and lasts for years.
Get a second opinion and quote on any maintenance or repairs needed. Unfortunately, some mechanics will try to rip you off.
Then do the math.
If putting $1,000 worth of work into your car means that it should run just fine for another year, it’s worth it. But if that $1,000 may or may not fix the issue, or is just the beginning of the long list of work needed, it might be time to replace it.
Use Public Transit
If public transit is available to you, use it as much as you can, for as long as you can.
According to a 2017 study by AAA, the average cost of car ownership is $706 per month. (Which makes my $525 seem like a bargain!) A monthly transit pass, on the other hand, costs less than $150 per month in most communities.
Taking public transit could therefore potentially save you over $550 per month.
So if you can suck it up, take public transit, and put even $250 aside towards a down-payment, you’ll have $3,000 saved after a year.
Had I followed this advice myself, I could have $9,000 saved up by the time I actually needed a car. Which would have reduced the amount I needed to finance by 35%.
Or, I could have used that extra money to focus on paying back my student loan. Paying an extra $3,000 per year would have made a significant difference, and would have saved me a whole lot of interest charges, too.
Rent a Car
Rent a car for the meantime if you have to. If you shop around, you can find deals on car rentals and pay as little as $10 – $25 a day.
Not only will this get from point A to point B for the time being, but it also gives you the chance to really try out different makes and models of cars, more than any quick test-drive will. This can make car shopping easier, as you know what features are a must for you, as well.
More importantly, it gives you time to shop around for the car that best fits your needs and your budget. Car dealers might take advantage if they know you are rushing to buy a car. You don’t want to give them the upper-hand when it comes to negotiating.
Maybe you only need a car a few times a month. In that case, it might make more sense for you to rent as needed versus buying a car.
Make a Plan
Whatever situation you are in, rushing to buy a car is a mistake that could cost you a lot. In order to avoid buyers remorse or ending up with an underwater car loan (where you owe more on your loan than what the car is worth), you need to make a plan.
Do You Really Need a Car?
First of all, figure out if you actually need a car or simply want a car. There’s a big difference between the two!
Please be completely honest with yourself, and don’t allow to buy into the hype that you “deserve” it (like I did.)
If you’re not sure, try going car-less for at least a week. If you can make it work, go car-less for a month. Doing so will give you a clear indication if it really is a want or a need.
You might find that it is a need, but only at certain times. In that case, renting a car or taking a cab or ride-share might make more sense.
How Soon Do You Need a Car?
If you decide that yes, you do need a car, figure out how soon you need it.
They say that the best time of year to buy a car is between October and December. Can you plan to buy then and get a better deal?
I bought my car in March, which was also a mistake. I could have survived the summer just fine walking and using transit instead. Waiting until the winter would have given me more time to research, plan, and save for a down-payment.
What’s Your Budget?
How much car can you actually afford?
The prices for cars vary drastically. You could find good used car for under $3,000 (or less if you’re mechanically inclined and can do the work yourself). Or you could buy a Rolls Royce for $13 million. The average price of a new car, however, is about $34,000.
What you can afford will of course vary and depends on a lot of things. Some things to consider include:
- Are you buying new or used?
- Do you have a down payment saved? How much do you have?
- Will you trade-in your old car? What’s the value of your trade-in?
- Are you financing or planning to pay in full?
- What is the interest rate and terms of financing?
- How long are you financing for – 3 years? 5 years? 8 years?
- Will this vehicle still fit your needs in those upcoming years?
- Is there a lump-sum payment required at the end of your financing term?
- What other debts do you have? How much are those payments per month?
- How much will insurance be for this vehicle?
- Is it fuel-efficient?
- Does it come with a warranty or maintenance package?
- What’s the reputation or history of the vehicle?
- How much can you comfortably afford to pay per month?
The general guideline is that you should not spend more than 35% of your annual income on your car. But if you make $40,000 per year, 35% is $14,000 or $1,166 per month. That’s a lot to pay per month!
The better guideline is to aim lower – as in 10% – especially if you have a lower income and/or other debts to pay. This would mean spending only $4,000 per year on your car, or $333 per month.
The amount you can afford to pay monthly is important, but so is the length of your car loan. Do you really want to spend 8 years making monthly payments? How will that impact your financial future – such as paying off your student loan, buying a house or starting a family?
Thanks to technology, shopping around for a new or used car is pretty easy to do.
Many car dealership websites have options to let you price out different cars and features, so you can customize it to your liking and figure out if the extra features are worth the extra cost to you or not. Sure, $10 per month for a built-in navigation system might sounds like a bargain, but if you’re financing over 5 years, is it really worth $600?
You can also compare different vehicles. Some will come with those additional features and options you want already built-in.
Arming yourself with quotes from other dealerships can also help you negotiate a better price on the car you choose. We were able to get another $1,000 knocked off the price of our newest car with this approach.
And lastly, if you are trading in your old vehicle, you can shop around for quotes on what that vehicle is worth, too. The first dealership we went to offered us only $400 for a trade-in. The dealership we went with, however, offered us $4,000. That made a huge difference and made buying a new car that much more feasible.
Rushing to Buy a New Car is a Mistake
Rushing to buy a car was mistake that I could have easily avoided. I wish I would have put a lot more thought and consideration into it rather than convincing myself I deserved it.
There is no doubt in my mind that my whole financial life would have been significantly better if I had taken my time and followed my own advice.
So don’t be like me! Take your time and don’t rush buying a new car. Your financial future will thank you.
Are you guilty of rushing to buy a new car? Was it a mistake or were you able to make it work? Please leave a comment and let us know!
Amanda Kay, the founder of My Life, I Guess, provides valuable career advice and support for anyone striving to make a living and, more importantly, make a life. Whether it's navigating job searches, learning new skills, overcoming unemployment, or dealing with debt, My Life, I Guess has been a go-to resource for career guidance and financial stability since 2013. Amanda's expertise and relatable approach have been featured in trusted publications such as MSN, Credit.com, Yahoo! Finance, the Ladders and Fairygodboss.