It’s an exciting prospect, buying a new car. Almost everything about it is wonderful, including the first time you lay eyes on the car you’re going to buy, the first time you open the door to sitting in the front seat, to turning the key a few clicks clockwise and then hearing the car’s engine rumble to life. Of course, you can’t forget that new car smell that’s become so popular they’ve made it into a scent you can buy. But how do you get to that point? What if your budget is stringent at best? Buying a car requires a lot of monetary evaluation, and unfortunately, if you’re not up to speed with setting a realistic budget, you shouldn’t even set foot into a dealership.
Setting a Budget
Before you even look at a car, take a look at your expenses. You’re going to want to take into account how much you pay for rent, how much you spend on food, entertainment and having a social life. Since you’re even looking at your budget, you probably aren’t going to buy the car outright with cash so you’re then going to consider an auto loan, which means monthly payments, so all your expenses should be calculated in terms of month-to-month.
After you’ve added up your expenses, give yourself an extra couple hundred dollars for contingencies. Food and rent are your staples, they simply should not be compromised in any way. Now you’ve got a number that represents your expenses, plus a little extra. Now subtract it from your monthly income, which you should have considered *after* taxes have been taken out. Subtract your expenses from your monthly income, and that should give you a good idea of how much you can spend per month on a car. Remember, a “car” isn’t just the car. It’s also gas and insurance. A good way of looking at this is to use a car loan calculator.
After you’ve got a good idea of how much car you can afford, you can finally start looking at cars. Since you’re looking at financing a car, a website like Craigslist might not be the best option. Instead, you can look at dealership websites and see what they’re offering in terms of certified used cars. Certified means the cars have been inspected, refurbished and then certified by the manufacturer. Otherwise, you can go to a dealership and select a used car from their inventory and finance it. KBB has a good tool you can use to figure out how much a car truly costs over a 5-year period.
How to Negotiate
Remember when buying a car from a dealership the price is always negotiable. Be sure to do your homework on how much the car you’re after is worth, and approach the dealer with a number in mind. Don’t just go to one, go to several and put the other offers against each other. In other words, after visiting multiple dealers take your best offer and if it’s less than what the first dealership offered, tell them that you can find the same car for that price at a different dealership and see what they say.
Other Factors to Consider Before Buying a Car
Take into account the time of year, i.e. buying a convertible sports car in the middle of summer is not a plan because demand is up. Wait until the end of the month when dealerships need to meet quotas, and follow up with them. If they can’t meet your price right away, leave and call in a week or so to check on if they are ready to meet your offer. Do this with multiple dealerships until you get the price you want. Remember to be reasonable with this process.
The bottom line is to do your homework. As long as you stay within your limits you should be good to go for any car that falls beneath those limits. Don’t kid yourself about how much you can afford. The last thing you want is a car that’s underwater, rather, a car that is worth less than the amount you owe, that’s just bad news.