Can I Buy A Car
People spend a lot of money on their cars and trucks. In fact, about 16% of the average American's total budget goes to transportation, including vehicle costs and fuel. That makes it the second-biggest expenditure after housing but before incidentals like food, education, and saving for retirement.
can i buy a car
Selection takes some thought. A small sports car might work for a single person or couple, but not if they're planning on starting a family. A large SUV might be great for camping and road-tripping with friends, but isn't likely to be much fun when it comes time to fuel up, pay for insurance, or find street parking.
With prices so high, shoppers also need to keep a close eye on their budget. "There is no point in test driving a car if it turns out you can't afford it," said Tom McParland, who runs the vehicle-buying service Automatch Consulting and writes about consumer issues and the automotive industry for Jalopnik.
Most experts advise spending no more than 20% of take-home pay on a vehicle, including payments, insurance and fuel or electricity. There are many online calculators to help consumers determine how much a car buyer can afford.
If you don't need a tall driving position and rarely travel in deep snow, a traditional car might be a better choice, however. Whether in the form of a sedan, coupe, convertible or station wagon, cars tend to be lighter and have a lower center of gravity than crossovers, which aids efficiency and handling.
Conversely, someone who regularly tows or travels on poorly-kept dirt roads might lean towards a traditional SUV or pickup, which are generally built on heavy-duty truck frames to take such abuse. Though most SUVs and pickups are gas hogs, there are a handful of efficient options, such as the hybrid version of the new Ford Maverick and diesel versions of the Ram 1500 and Chevrolet Tahoe. On top of this, a range of electric options including the Ford F-150 Lightning pickup are entering the market over the next year.
Anyone who doesn't go off-road or tow much but does carry a lot or people or stuff should remember that minivans still exist. This oft-overlooked segment of the market is ideal for larger families and there's a range of front- and all-wheel-drive minivan options that can seat up to eight people in car-like comfort.
Once a shopper has a particular type of vehicle in mind, they should read professional reviews (e.g. Car and Driver, Jalopnik and Edmunds) and search owners' reviews to determine which particular models interest them, then arrange for test drives.
The Covid pandemic has muted depreciation, however, and prices for used cars are growing faster than for new. As the price gap narrows, buying new becomes more appealing because the vehicles are in better condition, plus, they have a full warranty and can be financed at a lower rate.
Used Teslas have done particularly well of late, as gas prices have risen, spurring more interest in EVs and the economics of recharging versus filling up. The popular all-electric vehicles are now averaging $65,000 on the used marketplace, coming close to their cost when new.
"Paying cash is usually your best option because it limits how much you have to pour into a depreciating asset," said Greg McBride, the chief financial analyst at consumer finance site Bankrate.com. "But don't deplete your emergency fund just to buy the car."
Since leasees don't own the car during the term of their lease, they can run into trouble if they make modifications such as sound system or engine upgrades. They also have to pay a penalty for excessive wear and tear, terminating the lease early, or driving more than a set amount (usually about 12,000 miles annually, though some newer leases are down to 10,000).
Loans usually end up costing less than leases, especially for consumers who hold onto vehicles for years. Since they own the vehicle once the loan is paid off, consumers don't need to worry about mileage or wear, and there's no penalty for early termination. "We recommend loans to most shoppers, and putting down at least 20% to keep monthly payments reasonable and avoid GAP insurance," said Montoya.
GAP (short for Guaranteed Asset Protection) protects people who have a loan or lease on a car and owe more than its worth. If their car is totaled or stolen, it supplements regular insurance by paying the difference between what their vehicle is worth and what's owed.
McParland said that anyone financing should understand their credit score to know where they stand and then cross-shop lenders and lease providers. "It's always wise to be pre-approved for a loan before you talk to the dealer," he said. "That way, you do have some leverage for them to find you a rate that either matches or beats what you already have."
Problems with using dealers include their often aggressive sales tactics and tendency to fold extra services into vehicle sales at inflated prices. For instance, etching a vehicle identification number (VIN) onto the windshield is a useful practice that can deter theft and lower insurance rates, but a dealer might charge more than $300 for the work, which consumers can do themselves with a $25 kit. To avoid paying excessive fees, it's wise to ask about any dealer-installed options or markups, Montoya said. It's a sellers market, and dealers might not waive any of the costs they tack on, but the buyer can always take their business elsewhere.
Another option is to use a no-haggle dealership, typified by CarMax, Vroom and Carvana. These companies can charge more than traditional dealerships, but generally score positive reviews from consumers. Each promises stress-free shopping with a non-negotiable price and money back guarantees, plus large and easy-to-search inventories. Each will also deliver a new car right to your door, in most instances. Unlike the others, CarMax also offers physical locations where shoppers can peruse cars.
Under normal circumstances, a car shopper might be advised to wait for the end of the month because that's when many dealers are looking to make quotas and are more likely to negotiate. They might also be told to look for cars that are being discontinued or redesigned because dealers want to get them off the lot.
Prices are at all-time highs and aren't expected to drop until 2023 at the earliest. If you already have a reliable vehicle, or live in an area with decent public transportation, the best decision might be to hold off on a vehicle purchase.
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