Want to find out how much car you can afford right away? Take the Aqqru car affordability quiz!
Buying a car should be a fun experience, especially if it’s your first time. The biggest woe most people get held up on is wanting a brand new car versus a used car. You might want a brand spanking new car, but does your bank account allow for it?
When you’re deciding whether to buy new or used, there are a few key financial details you need to consider before you make any large purchases.
Table of Contents
What Can I Afford?
Some of the wealthiest people in the world have a budget in place. A thought out budget is a guiding light towards financial freedom and stability. Review and rework your budget to determine how much you can afford to put toward monthly payments of a new car. Once you’ve figured out your income vs your monthly output, you’ll have a realistic number you can contribute towards a new vehicle.
Unless your current car is on the verge of a roadside breakdown, blowing through your entire savings to buy a car you don’t need isn’t a smart move. If you have a decent amount of money in your savings, try not to use it all. Put a portion of your saving as a down payment alongside your current vehicle trade-in, and keep the rest in savings.
Consider Insurance Premium Prices
If you’re entering adulthood and setting up your auto insurance plans, expect rates to be higher than if you were on your parent’s plan. Insurance rates for vehicles are dependent on a few things like the address of where the car is kept, market value, type of vehicle, driver’s age, and amount of drivers in the household. There are exceptions to the rule such as attending school, eligible driver of a car owned by your parents or you live in another house your parents own.
If you’re living in the same household as your parents, stay on their plan. The bundling price could be more affordable than if you were on your own and you can pay them every month. As long as the other drivers on your policy have good driving records. Once you move out and have a different home address, you’re required to have your own auto insurance.
Safety Ratings and Recalls
Age and mileage on a car do not always correlate to safety. There are used cars that have thousands of miles with better safety ratings than a brand new sports car. Modern cars have more computer and electronic components that come with higher maintenance costs. Search for safety ratings of the vehicle your considering and check recalls before you sign any contracts to make sure your potential new car doesn’t have a record of issues. Use the National Highway Traffic Safety Administration (NHTSA) and Insurance Institute for Highway Safety (IIHS) to conduct your research.
Warranties and Extended Warranties
Warranties on a brand new vehicle are important because the cost to repair issues on a new car can be very high. Depending on the type of factory warrant your new car comes with (or if you bought an extended warranty), most issues that arise should be covered. This doesn’t guarantee every repair will be covered. You should thoroughly read your warranty details before you pay for any type of extended warranty
A used car could still be under factory warranty depending on when you bought it. If not, be wary of salespeople trying to convince you to buy a costly extended warranty. Often, these extended warranties don’t cover nearly as much as the original warranty and potential repairs might not be worth the big-ticket price.
Benefits Of Buying A New Car vs Used Car
Deciding whether you should buy a new or used car? Read on to learn more about the benefit of each.
- Easier to shop for a new car at the convenient dealer
- Financing incentives
- Improved safety features
- Newer technology and lower emissions
- Depreciates the moment it leaves the lot
- More expensive
- Unknown reliability for model year
- High sales tax
- Lower insurance rates and registration fees
- Car history reports
- Low-cost maintenance
- Less depreciation if you decide to sell it
- You might need a mechanic to check it out before purchasing
- Less efficient gas mileage
- Uncertainty surrounding collateral value could alter financing approval
- Sometime no warranty coverage – sold as is
Enhance Your Borrowing Power With A Credit Builder Loan
If poor credit is holding you back from buying your next car or getting better insurance rates, MoneyLion can help! For $19.99/month, you can borrow up to $1000 when you apply for a low-cost Credit Builder Loan.
Get same-day funding and pay back your loan with affordable monthly installment payments. Our members have seen credit score improvements by up to 60 points within 60 days! Sign up for a RoarMoney account and get started today!