Picture it: top down, sun shining, the wind in your hair. Sounds pretty good, right? Buying a new car can be fun- everyone likes new stuff (or new-to-you stuff)! Here we’ll help you figure out the right car purchase for you.

How Much Can I Spend?

First thing’s first- how much can you afford? Figuring this out will help you decide what kind of car you should look at. Consider your current budget, other expenses, goals and family needs coming up. If you’re paying cash, make sure to keep your emergency fund intact. If you’re financing, look at your monthly budget to see what monthly payment will fit within your means. Do some research before you head to the dealership to see what interest rates you qualify for so you can compare with what they offer. Depending on the interest rate (0-3% is a fair rate), financing can make a lot of sense. Once interest rates get >5% we want to think through other options. Check out a car payment calculator to help you figure the various payments based on interest rates, loan terms and down payments. Keep in mind the longer the loan term, the more interest you will pay. Below you will see the amounts of interest you will pay with various loan terms. Don’t forget to include any increase (or decrease) in auto insurance premium in your calculations.

Buy or Lease

Should you buy or lease? Leasing a car is like renting it from the dealership- you pay a monthly payment for the life of the lease (usually 3-5 years) and then you return it to the dealer at the end of the lease. Buying, on the other hand, is you owning the vehicle either outright if you paid cash, or at the end of your loan if you finance. There are pros and cons to each, so consider them carefully before making your decision.

Dealerships

If you felt some anxiety reading that word, we get it. Dealerships get a bad rap. But if you’re getting a used car, getting one from the dealership might be the better route to lessen your chances of getting a ‘lemon.’ To ease the stress of going to the dealership, here are a few tips when you head to the dealership: 

• Check out more than one dealership and research purchase prices ahead of time on Kelley Blue Book. 

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• Email a few dealers before going in person to get quotes. You can then compare them and get the dealerships competing/lowering their prices over email (saving you time in-store).

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• Get pre approved from your current bank or a credit union for an auto loan, so you know both how much you are pre approved for and at what rate. This will force the auto dealership to match or beat your bank’s interest rate. 

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• Don’t be pressured to purchase unnecessary add-ons, even if it takes 2 hours of arguing with the salesperson to get the superfluous additions removed (as was my painful experience).

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• Look for deals (clearing out last year's new inventory), and be prepared to walk away if a dealership won’t give you what you want. 

Auto Insurance

Finally, we’ve got to protect that shiny new ride! Having auto insurance is required by law. If you finance or lease, your lessor will typically require higher insurance limits than state required minimums (and you should carry higher limits than that anyway). This is a good time to check other insurance companies to make sure you get the best price.

Good luck on finding your new vehicle, and at the risk of sounding like your mom, drive safely!