If it’s time to replace your old car with something new, modern, and more fuel-efficient, we understand how you must be feeling. Buying a new car is exciting. Most of us use our cars every single day and form a type of relationship with them.
However, buying a car is also a big financial commitment, which adds a layer of stress to the equation. Fortunately, we can teach you what to know before buying a car, which will help you can alleviate some of this stress and anxiety.
This includes personal financial planning, researching vehicle prices, finding the best lender, and of course, purchasing the most appropriate vehicle for your needs.
Keep reading for an in-depth guide of everything you need to consider before buying a car.
Understand the Costs of Buying and Owning a Car
When it comes to what to know before buying a car, one of the most important things to consider is your personal finances. A recent study reports that over half of the nation, 54% of Americans, are living paycheck to paycheck. This is often the result of over-extending ourselves while financing cars, homes, and other purchases.
Therefore, we highly recommend assessing your budget before shopping for a new vehicle. Determine what you can comfortably afford to spend each month. However, there are more vehicle expenses than you might think, such as:
- Monthly loan payments
- Monthly auto insurance payments
- Yearly vehicle registration fees
- Regular fuel costs
- Maintenance and repairs
Make sure you account for all of these costs in your personal financial planning before purchasing your next vehicle. Don’t put yourself under financial strain by investing in a vehicle that’s outside your means.
What to Know Before Buying a Car Through Financing
For most people, buying a car means taking out an auto loan. After all, even people who aren’t living paycheck to paycheck don’t necessarily have thousands of dollars laying around. And for those who do, it doesn’t mean they want to spend it all on an upfront vehicle purchase.
Regardless, most people choose to finance a car. This is a great option for the majority of buyers. Let’s take a quick look at some things you need to know about taking out a loan for a vehicle.
Your Loan Eligibility
First, you need to understand that what you determined you can afford based on your personal financial planning might not match up with what a bank thinks you can afford. Ultimately, it comes down to your credit score.
Your credit score is determined by:
- Your debt and bill payment history
- The types of credit in your name
- Available credit
- Your debt to income ratio
- And more
While it’s possible to get approved for an auto loan with poor or limited credit, you likely won’t be able to get approved for very much money. It also means sacrificing attractive terms and low interest rates. But why are these important?
Loan Terms and Interest Rates
Buying a car through financing means taking out a loan for several years. This is where the importance of your credit score makes itself evident. The higher your credit score is, the lower the interest rates you can obtain.
Lower interest rates can save you thousands of dollars over the length of your loan. For reference, let’s say you take out a five-year vehicle loan for $25,000.
With a 6% interest rate, this loan will cost you just under $29,000 by the time you pay it off. Now, if you get the same loan with a 3% interest rate, it will only cost you $26,953.
If possible, we also recommend opting for shorter loan terms. This will mean higher monthly payments, but less time paying interest.
Know the Difference Between New, Used, and CPO Vehicles
Now, let’s look at what to know before buying a car in terms of age. Obviously, there are new and used vehicles. However, there is also the certified pre-owned option that comes with its own benefits.
To help you understand your options, here’s a quick look at the pros and cons of new, used, and CPO vehicles.
New Car Pros and Cons
New cars are appealing to buyers because they come with the latest features, technology, and safety standards. You also gain peace of mind knowing that the vehicle hasn’t had any other owners. Furthermore, brand new vehicles come with bumper-to-pumper and drive train manufacturer warranties.
However, vehicle prices for brand new models are much higher than their used counterparts. You also need to consider the vehicle depreciation rate of new cars. Brand new vehicles can lose as much as 30% of their value in the first year.
They continue to depreciate 10% to 15% for the next several years. This is because a new, better model comes out annually, making the previous model “old news.”
Used Car Pros and Cons
Now, if one of your goals is to save money, you’ll want to look at used cars. Not only do they come with lower price tags, but you won’t be the one paying for their depreciation. If you buy a used car that’s two or three years old, the worst of its rapid depreciation is over.
Yet, when buying a used car, it likely won’t come with a warranty. If something goes fundamentally wrong, you’ll have to pay for it yourself. Additionally, you won’t have been the only owner and you can’t know for sure how well they took care of the vehicle.
And, of course, buying a used car means settling for older technology. In a vehicle that’s only a couple of years old, this isn’t a huge deal. However, there’s a profound difference between 2021 vehicle models and 2011 vehicle models.
Certified Pre-Owned Pros and Cons
If you’re looking at your personal finances and have determined that your budget lands somewhere between new and used cars, we have some good news for you. Certified pre-owned vehicles are the happy medium between the two.
A CPO is a vehicle that is only a few years old and has limited mileage. It has been refurbished by a certified dealership or manufacturer to a like-new condition. Aesthetically, mechanically, and electronically, CPOs are nearly flawless.
They also come with renewed warranties. Naturally, CPOs are more expensive than used vehicles, yet more affordable than brand new vehicles.
Vehicle History Reports
Before we move on, let’s talk about what to know before buying a car if you’re looking at used or CPO vehicles. You must get a vehicle history report to verify the car’s past. A vehicle history report documents important information, such as:
- Vehicle maintenance
- Damages and repairs
- Factory recalls
- Commercial use history (as fleet vehicles, rentals, or leases)
- Areas of registration
- Number of past owners
- And more
This information is essential for verifying the condition and history of a vehicle before you buy it. Skipping the vehicle history report could land you with a car with a salvaged title, which will make it worthless for resale in the future. It might also have a number of underlying problems.
Consider the Different Vehicle Styles and Functions
Aside from your personal financial planning, you also need to consider your lifestyle when buying a car. The vehicle you buy should complement your life and make it easier.
For example, if you’re mainly going to be using your car for commuting to work, getting groceries, and driving your kids to soccer practice, you’ll want something that gets great in-town mileage. If you have a bigger family, you’ll want something bigger, like a wagon, van, or SUV. You might also want something that makes road trips comfortable and entertaining to keep family members happy for long hours on the road.
Alternatively, if you’re into outdoor recreational activities like hunting, hiking, camping, and boating, find a vehicle that can accommodate these hobbies. For example, you’ll need a powerful truck to haul a camper, boat, ATVs, or some combination of them.
Think about your lifestyle, hobbies, and future before investing in a new vehicle. If you have a growing family, buying a two-door sports car might not be appropriate.
Know Your Options for Vehicle Features
Once you know the basic style of vehicle that you’re looking for, you can get into the finer details of what to know before buying a car. We’re talking about the extra features that come with different trim levels. Most vehicle models come in basic, advanced, and luxury options.
If you’re buying a new vehicle, you might have the option to customize it as you see fit. This way you can include the options you want without being forced into a fully-loaded trim package.
Different features you can choose from include:
- Interior materials
- Entertainment features (speakers, infotainment unit, screens, etc.)
- Safety features (lane assist, automatic braking, external cameras)
- Comfort features (remote start, heated/cooled seated, heated steering wheel, dual side temperature controls)
- Aesthetic features (rim and tires, custom paint, window tint)
- And more
These features will all affect vehicle prices. In this case, buying a used car that’s fully loaded could be a great way to get into a luxurious model while still saving money. Whereas, buying a brand-new fully-load vehicle would be rather expensive.
Research True Car Values
One of the most important things we should talk about regarding what to know before buying a car is the true value of vehicles. This includes both the car you’re interested in buying and the car you’re planning on trading in.
Like any business, car dealerships can’t sell you their products at cost. Otherwise, they wouldn’t make any money. However, this doesn’t mean you should pay exorbitant vehicle prices.
We recommend finding a vehicle you’re interested in at the local dealer or through a private buyer. Then, using the available details, go online to research the car’s value. Important details include:
- Make and model
These basic details will be in any respectable listing. The fair market value will vary based on if you’re buying through a private seller or dealership.
Using the same source linked above, you can find an accurate value for your vehicle. You can see how much it’s worth to sell privately or to use as a trade-in.
Verify the Condition of the Vehicle
Once you find the right vehicle for the right price, don’t rush into the sale just yet. First, have the vehicle inspected by a third-party mechanic. If the private seller or car dealer says it’s already been inspected, insist on verifying the condition for yourself.
If the seller won’t allow you to have the vehicle looked at, walk away. They might be trying to hide a fundamental, underlying issue. If not, they simply don’t want the sale badly enough to accommodate your peace of mind.
Never Skip the Test Drive
Before we finish up, we need to discuss what to know before buying a car in terms of your personal connection with the vehicle. It’s absolutely essential to test drive a car before buying it. Looking at pictures and videos of a vehicle is substantially different than sitting in it and driving it.
Is the vehicle comfortable and easy to operate. Do you have a good field of vision? Do you like the way you feel sitting behind the wheel?
Aside from these personal preferences, a test drive is a perfect time to ensure everything in the vehicle functions the way it should. While parked, inspect:
- Heating and air conditioning
- Seat adjustments (movement, heat, cooling)
- Radio and entertainment components
- Windshield wipers and wiper fluid
- Emergency lights
Then, take the car out on the road. If possible, make sure you get some highway time on the drive as well. Some issues are only evident at high speeds.
- Brake sensitivity
- Cruise control
- Turning radius
- Backup cameras
- Driver-assist features
It’s okay to be thorough when buying a car. Take your time and assess the vehicle adequately. Remember, your safety, and that of your family will be affected by your choice.
Are You Ready to Buy a Car?
Now that we’ve talked your ear off about what to know before buying a car, do you think you’re ready? Clearly, there’s a lot to consider before you make this choice. Between your finances, lifestyle, and personal preferences, you have your work cut out for you.
Good luck in your venture and be sure to consider everything listed in this article. And if you’re after more car buying advice, vehicle maintenance tips, or anything in between, we have more to offer. Before you go, look through some of our other articles to find the information you need.