Your First-Time Car Buying Cheat Sheet
Buying a car can be exciting and fun, but it can also be scary, especially for a first time buyer. It’s easy to picture yourself driving out of the parking lot and into the sunset in that shiny new car, but it’s also important to think about long-term financial obligations and lifestyle commitments. Buying a car is one of the biggest financial commitments a person makes after buying a home. Buying a car is not only a big financial obligation, but also a long-term one. Follow these car buying tips to make sure you are buying a car that you can realistically afford and will be happy with in the long run.
Find the Magic Number
The cars are available in all different colors, sizes and price ranges. Many people make the mistake of rearranging their budget to fit the car payment they really want, but this could lead to serious financial problems in the future. To find your magic number, or the monthly payment that you can realistically afford, you need to start by creating a budget for the purchase of a car. This will help you limit your options to cars that fall within your price range and fit your lifestyle. This ensures that you will be satisfied with the purchase in the long run. First, determine your monthly household income (what you take home after tax) and your monthly expenses. The expense list should include everything big or small, your phone bill, your savings or pension fund, your house rent or payment, your appointment night, even that half-day trip to the vending machine of work. Once you have calculated your monthly budget, you need to decide not only how much you want to spend, but also how much you can realistically afford to spend. With your budget in mind, a good rule of thumb is not to spend more than 20% of your monthly income on the car payment.
Your magic number = between 15-20% of your monthly income after taxes.
But consider your other expenses, if you have credit card debt or student loan payments that are taking a big chunk of your rest after taking home your salary, consider lowering this percentage if necessary. Paying for your car should be what you can comfortably afford. If you stretch your budget too much and cut back on unrealistic expenses, you run the risk of losing your mind. When creating your budget and setting your magic number, be honest with yourself. Your monthly payment shouldn’t be a burden.
Narrow the Playing Field
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Once you have developed your budget and determined your magic number, you need to decide what is a necessity and what you can live without. Think about your daily routine and ask yourself the following questions.
Are you the queen of carpooling or do you usually go to work alone? If you’re carpooling, a spacious back seat may be a priority for you. If the ride is long and the traffic is busy, we recommend that you take a closer look at fuel economy. Think about the parking lot of your work; if it has small spaces, a compact car might be a better option
What kind of security features are important to you? If you already have a family or plan to start one in the near future, it’s important to think about safety and accessibility
Do you need a large amount of cargo space or towing capacity? If you have children who play sports, take frequent road trips, or have a trailer to carry goods, towing may be a greater concern
Understanding the difference between your needs and wants and finding an economic balance is the key to long-term satisfaction with your purchase. Use your answers to the previous question to make two lists, needs and wants. Creating these lists will help you narrow down the list to cars that fit into your price range and lifestyle.
Make a Wish List
With so many different brands and models available, it can feel overwhelming. Use your magic number and need and wish lists to start creating your car wish list. Even if you already have a car in mind, it’s good to look at similar vehicles to make sure you haven’t overlooked a better option or an option you didn’t know was out there. Start by choosing three different models that interest you. So, do the following:
Look for ratings and reviews
Know the standard features
Compare these models with similar ones from other companies
Look for a car that meets your needs first, and remember ownership is more than just a monthly payment. Total cost of ownership includes taxes, fuel, insurance and maintenance. If the templates you’ve chosen fall below your magic number, you can determine if you can add extra features from your wish list.