Buying a car is a major undertaking given the amount of money involved and how important vehicles are in our daily lives.
Matt detailed the process of buying yet another car a few months ago, and we’ve spoken in the past about the mistake some buyers make when they assume others actually care what they drive. This can lead to buying a car that’s not right for you which can be very costly.
Dealers will tell you you can get out of a bad car loan or easily replace your current vehicle even if it’s not paid for yet, and they are right. You can very quickly tack on your existing loan to a new vehicle loan and get a new car. They will ask how much you can afford per month and give you a car that costs that much per month. You don’t really have to worry about depreciation, interest costs and how long you’ll be stuck with the vehicle because, hey, it’s a new car.
Needless to say, this is not how you want to go about buying a car. There’s nothing wrong with having a car that you finance or lease. What you don’t want, is a car that will become a financial burden long after it has worn out its usefulness or ability to fit your lifestyle and answer your needs.
“A car is an asset that depreciates. It has to be treated as such. Now, there are situations where we can help improve a client’s situation by reducing massive interest costs, but in general you should buy a car that will fit your changing needs over the next few years, fits your budget, leaves some leeway for unexpected costs, and that we won’t have any problem keeping until the loan or lease is done”, a financial services representative told us at a dealership in Vancouver.
That’s your first tip right then when it comes to buying a car, but especially your first car.
1. Buy a car you can afford
Simple enough, right? And yet, this is the main problem people have with their cars. They just can’t afford them. Buying your first car, you want to be extra careful about which vehicle you purchase because you don’t want it to have an impact on your future credit and ability to take out a loan.
We assume you’re pretty young if you’re buying a first car. That means your financial goals and needs will be changing over the next five years. You may want to buy a house, or go to University, or start a family. Make sure you can afford your car today, but that you can also afford it in three or five years as other aspects of your life take off.
2. Buy a car that will fit your changing needs
We just talked about changing needs. They will change financially, but they will also change in terms of how much space you need in your car or how many kilometers you will be driving annually, for example. Again, we are assuming you are young here and just starting out.
You may be fine with two doors today, but what if you and your significant other have twins in three years and you buy a coupe on a 72-month loan? Or, imagine you buy a car you can’t afford to finance, but can certainly afford to lease. Except that in two years you’re transferred to sales and have to drive 30,000 miles every year which is double what your lease allows.
We don’t know what the future holds, obviously, but we can try and plan for it as best we can. Try and do so before buying a car.
3. Buy a car that doesn’t cost too much to maintain and drive
It’s a classic example. A young adult buys a pre-owned 1998 Audi because it fits his budget. He goes to get an oil change only to realize they require special tools, a special kind of oil, and a special kind of technician with a special kind of training.
And because it’s a German luxury car from the 1990s, it tends to break a lot a need to that special kind of technician often. After a year, more money has been sunk into maintaining a car than what it cost to buy. Not good.
Do a bit of research before buying. Check forums for ownership costs, call your insurance company for rates on different vehicles, ask an auto journalist about a given model’s reliability… Do everything you can to get an idea of how much a car will cost to own, maintain, and repair.
You will always remember your first car and how and where you bought it. Following the tips above will make sure these are fond memories.