Categories: Autos

How To Buy A Car And Stick To Your Budget

August 27, 2015

Buying a car on a budget requires discipline, introspection and willpower. If money were no object, we would all just drive Porsches. The costs of buying and owning a car can add up quickly. The people who sell cars and issue loans are out to make money. It is up to you, the buyer, to conduct research, evaluate your budget and buy within your means.

Classes and Categories: Know Your Cars

As discussed in the article “What Cars are the Cheapest to Own?,” most buyers will be shopping within a specific category or class of cars. Subcompacts are generally the least expensive, but they are often the least roomy, least powerful and come with the fewest frills. Popular subcompacts are the Ford Fiesta and the Scion IQ. Compacts are some of the most commonly seen cars on the road. The Toyota Corolla has been one of the most popular compacts for years.

Sedans like the Chevy Impala, the Nissan Altima and the Toyota Camry are generally more luxurious and more powerful, but come with a higher sticker price. Specialty vehicles like SUVs, crossovers, vans, minivans and trucks are often more expensive to own and lease, but have far more cargo room, and often more power, than smaller cars.

Beyond Sticker Price

It is important to look beyond the sticker price when shopping for a car. The price of gas is your vehicle’s most frequent source of overhead expense. By choosing a slightly more expensive vehicle with better fuel economy, you’ll quickly make up for the higher sticker price.

The condition of the car has a lot to do with its price, but this is not an area where you want to play it cheap. Saving a little on the sticker price won’t save you much at all if you are constantly dumping money into repairs. Another factor is depreciation. The moment a new car leaves the lot, it is a used car – and used cars are significantly less valuable. Consider buying previously owned. This lets the first owner eat the depreciation cost.

Banks vs. Credit Unions

If you buy form a dealer, the dealer is likely to push their in-house financing on you. They may have very good interest rates, but it is always best to retain leverage by going in with approved financing. There are several ways to get financing, the most common, of course, is to go to a bank. Banks finance cars all the time, but so do credit unions. Unlike banks, credit unions are nonprofit, member-owned institutions. They are often more likely to give better rates, and to work with customers with spotty financial histories thank large banks.

Virtually anyone can join one credit union or another. Some base membership eligibility on military service, others on occupation or industry, others are based on where you go to school, and others only require residence in a certain geographic location. Once you join a credit union, you become a member – and a partial owner.

Buying a car is exciting. Shopping for one, narrowing down your options and being honest about what you can’t afford is not exciting at all – but these are all steps that are absolutely necessary. Don’t think about the car you want – think about the class of cars you can afford and then narrow it down from there. Factor in off-sticker costs, especially recurring costs like fuel and repairs. Determine what you’ll be able to get for the car after it depreciates, secure financing before you go to the dealership and consider working with a credit union instead of a big bank.

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