Buying a car is a big expense that can significantly affect your financial situation. To make sure you don’t find yourself in a crisis in a few months, you should always evaluate your budget before going to the dealership. Reviewing this guide is a great start to making sure you end up with a car that fits your budget and your lifestyle.
Create a Budget
If you don’t have a budget, you need one so you can see how much discretionary income you have. If this number is lower than you expected, take a close look at your budget and see if there are unnecessary expenses like daily coffee runs and subscriptions you can cut out. I know it’s hard to make sacrifices but you’d be surprised how much you can save by making small changes in your spending habits. Apps like Albert can help you identify these expenses and make smarter choices about your spending. If you have a hard time forcing yourself to save, try an app like Digit that automatically transfers money to your savings.
Optimizing your budget can also help you save more for a down payment. The bigger the down payment you can make, the better off you will be in the long-run, like helping you avoid a tempting car loan that can add thousands to your overall vehicle cost over the years.
If you’ve never created a budget before, my budget printables are a free and easy way to start your first budget.
Figure Out Your Price Range
Just because you have a decent amount of discretionary income right now doesn’t mean that’s how much you should spend on a car. The total cost of your car should not exceed 15% of your gross income, which is what you actually take home on your paychecks. If you have a hard time managing your bills, you might want to be more conservative by staying closer to 10%.
While you may be disappointed when you realize that you can’t afford that new car you’ve had your eye on, you should find comfort in the fact that they’re typically not worth the extra cost since they depreciate significantly as soon as they leave the lot. In fact, there are plenty of excellent used car options that are just a few years old.
Don’t Buy the First Car You See
It can be hard not to get caught up in the excitement of buying a new car, but doing your research and taking the time to shop around could potentially save you thousands. That savings can go a long way if you’re on a tighter budget.
I highly recommend doing heavy research on the different makes and models that are in your price range. Once you have an idea of a few cars that fit your needs, browse around local dealership websites before you make any in-person visits. This helps you get an idea of their inventory and pricing and keeps you away from persuasive dealers. Choosing the right dealership is crucial and is very easy to do if you live in a city with a lot of dealers like Las Vegas. Sometimes, choosing a dealer that specializes in your ideal car can also be beneficial. For instance, if you have your heart set on an Audi, go to an Audi dealership in Las Vegas instead of a Nissan dealership that isn’t as likely to have what you’re looking for in stock.
Find Cheaper Insurance
It might come as a surprise to you but reducing your insurance costs is one of the best ways to save on your vehicle expenses. If you’ve had your insurance for a while, there’s a pretty good chance you could save if you look into other providers. By finding a more affordable policy, you can reduce that expense and allocate more of your budget to the cost of your new car.
Don’t Let a Dealer Change Your Mind
At the end of the day, the dealer is a salesperson who relies on profits to make money and they can’t do that by selling cars at market value. Like with any sale, add-ons are an easy way to hike up the cost of a car. While some of these services can be tempting, they aren’t worth ending up way over budget and making big sacrifices down the road. Make sure you double-check your paperwork before signing to make sure that you’re getting the deal you agreed to and that hidden fees haven’t made their way into your total.
Being financially responsible doesn’t have to take the fun out of buying a car. In fact, the money you save with these tips can make the experience even better.