Preparing to Buy a Vehicle

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Preparing to Buy a Vehicle

If you are about to buy a vehicle, here are some important things to consider.

Know what you want

It is a good idea to write down what you want in a car. This goes for buying new, buying used, or leasing. If you shop at a dealer, the salesperson will want to know your preferences anyway; this saves him or her valuable time. Write down requirements such as these:

• The price range you want to spend
• Type of vehicle—sedan, SUV, minivan, etc.
• Make
• Model
• Features you want
• Mileage range
• Age range
• How much you can afford to spend each month, if you finance
• Any other preference: color, engine size, luxury options

Do you want your vehicle new or used? Here is a quick review of the advantages of each:

Buying new

• You can get it the way you want it
• There is less of a history behind it
• Better safety features
• Better technology
• New warranty
• Better fuel efficiency
• Maintenance included
• The feeling of having a new car

Buying used

• Less expensive (this is the biggest advantage)
• Insurance costs less, on average
• You can still get a warranty
• Parts may cost less
• Scratches and dings to the car are usually less stressful to look at

What costs should you consider? Estimate the true cost of ownership

Your monthly car payments are one thing. Have you considered the true cost of ownership over the course of the vehicle’s life? Although one car you like might be less expensive to buy than another one you like, it may ultimately be more expensive to maintain over time. This is important to remember when you just can’t decide between two choices and you need a little nudge to move you in one direction.

You might save $1,000 or so by going with one of the two, but the purchase price is only the most immediate and obvious price. Think of three, four, or ten years down the road. Is the insurance on one more expensive than the insurance on the other? How will the make and model affect your gas consumption? Will there be special maintenance needed? How does the depreciation compare? Does one of them get tax credits?

What is involved in the true cost?

You might find that you can afford to buy the cheaper one but not afford to own it as time goes on. Here are the main costs of ownership to consider as you own your vehicle:

• The price of the vehicle
• Taxes
• Fees for registration
• Fuel
• Gas mileage
• Insurance
• Maintenance
• Repairs
• Tax credits
• Financing—that is, the interest you must pay on your loan
• Depreciation
• Trade-in value
• Dealer service contract or other warranty
• Fees for registration
• Fees for emissions testing (in some states)

Online calculators can help you plug in the variables above to arrive at an estimate that spans a certain time period. Ultimately, you will want to put certain costs—repairs, gas, regular maintenance, fees, insurance—into your monthly budget. It’s also a good idea to set up an emergency fund that you can tap if you have a big sudden expense.