Whether you're a first-time car buyer or you've, quite literally, been around the block a few times, it's easy to feel overwhelmed by the variety of used cars out there. You may be in need of a car as soon as possible, or maybe you've realized you’ve outgrown your current vehicle.
Either way, the most helpful way to narrow down your options is by taking an audit of your needs, budget, and expectations from a vehicle. Start by asking yourself the following questions.
What's My Budget?
To set yourself up with reasonable financial expectations, you’ll want to make sure you take a close look at what you can afford. Unless you’re planning to buy a car in cash, you’ll want to dig a little deeper into your monthly finances and credit score to select a price range you can live with.
Since auto loans and leases alike are paid off in monthly installments, consider your monthly budget for vehicle expenses. A good guideline to follow is no more than 10% to 15% of your net monthly income should be going towards total transportation costs.
The total cost of ownership for your vehicle will depend on how many miles you plan to drive, gas prices in your area, your driving history’s impact on car insurance and possible repairs. Remember that you can expect to pay around 10% more in taxes and lender fees, depending on your state, on any sticker price you see. Consider whether it’s worth waiting until you can save more towards a down payment to reduce the size of your loan.
For example, let’s say you were to buy a 2019 Subaru Impreza. With Americans averaging 14,263 miles per year, a 3-year old vehicle is most likely to have around 42,800 miles on it. The Kelley Blue Book value suggests a fair market price of $21,800. However, you’ll see below that the projected 5-year cost of ownership is nearly double, at $40,665.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Total |
Insurance | $1,392 | $1,434 | $1,477 | $1,521 | $1,567 | $7,391 |
Maintenance | $1,248 | $1,612 | $911 | $1,265 | $2,421 | $7,457 |
Repairs | $131 | $312 | $459 | $536 | $627 | $2,065 |
Taxes & Fees | $1,819 | $174 | $164 | $154 | $146 | $2,457 |
Financing | $524 | $415 | $302 | $185 | $67 | $1,493 |
Depreciation | $3,324 | $1,619 | $1,445 | $1,313 | $1,206 | $8,907 |
Fuel | $2,052 | $2,114 | $2,177 | $2,242 | $2,310 | $10,895 |
True Cost to Own® | $10,490 | $7,680 | $6,935 | $7,216 | $8,344 | $40,665 |
*Based on proprietary data from Edmunds.com
That said, you’ll find that by buying it at 3 years old you’re saving $6,388 in depreciation costs alone, which reduces year after year. It’s important to get a quote for your insurance and shop around for the best deal on a car loan.
Should I Buy New Or Used?
The difference between new and used cars often comes down to savings. If you’re feeling drawn to a new car smell, know that you’ll pay for that good feeling.
New cars depreciate at much higher rates than used cars. IseeCars.com reveals that the average new car's resale value drops by more than 40% over the first 5 years of ownership. Used cars have already gone through their early loss of value, so you can expect a better price and slower depreciation over the years.
Consider: What Do I Need A Car For?
When you envision your next car, where do you see it taking you? If you’re commuting often and plan to put over 12,000 miles a year on the car, you may consider researching vehicles that retain their resale value over time or vehicles that last the longest.
Did you just score that remote job and plan on working off the beaten path? Drivetrain will be an important consideration for you. Make sure you buy an off-road vehicle equipped to handle rough terrain.
Whatever the circ*mstances, really ask yourself what you expect out of your next car to help you pick the right one for your situation.
How Many People Do I Plan On Hauling?
You can filter out entire categories of vehicles based on how many passengers you plan to have and how frequently your car will be full. If you have young children that come with strollers and car seats, or want your teenager’s friends to feel welcome to come along for the ride, consider a reliable, safe family car.
What Conditions Will I Be Driving In?
The kind of road conditions you'll face has an enormous impact on which car you should buy. If your city gets a lot of rain, snow, slush and salt on your local roads, an all-wheel-drive (AWD) vehicle with high ground clearance, such as a Ford Explorer or GMC Yukon, would make good choices. Southern California, however, may be just the right place for convertible Mustangs or Corvettes with lower ground clearance and room in back for a surfboard.
How Are Gas Prices Where I Live?
With rising fuel prices, the cost of filling up the tank should be a serious consideration in your budget. If fuel economy is important to you, consider a car with good gas mileage. There are super-efficient models available in every category, although some are better than others.
FAQs
Choosing a new vehicle can feel overwhelming, but by taking the time to look at these four factors - lifestyle, budget, feel, and value – you can navigate your options and make the best decision for yourself and your family.
What car should I buy based on my salary? ›
It depends on how much income you have after your bills and expenses. But as a rule of thumb, your car payment should not exceed 15% of your post-tax monthly pay. For example, if after taxes, you make the U.S. median income of $37,773, you could shop for a car that costs up to $472 per month.
Which car is best value for money? ›
Engine Displacement
- 7.8. HondaAmaze. Petrol. ...
- Newly Launched. MahindraXUV 3XO. Petrol, Diesel. ...
- 8.3. Maruti SuzukiFronx. Petrol, CNG. ...
- Newly Launched. ToyotaUrban Cruiser Taisor. Petrol, CNG. ...
- MahindraBolero Pik-Up. Diesel, CNG. 17.20 KM/L. ...
- 8.3. HyundaiVenue. Petrol, Diesel. ...
- 8.4. TataTiago EV. Electric. ...
- 8.4. MahindraXUV300. Petrol, Diesel.
What is the most reliable car to buy? ›
#1 Most Reliable Car Brand: Lexus
Starting with Toyota fundamentals and making those even nicer proves successful for Lexus—it's J.D. Power's most reliable car brand this year, earning a score of just 135 PP100.
What is the wisest way to buy a car? ›
Whether you're looking to buy new or used, we have some tips for you on budgeting and making a financially savvy car purchase.
- Choose wisely. Choose the make and model based on what you need. ...
- Set a budget. ...
- Make a big down payment. ...
- Look for sales. ...
- Shop around for the best loan. ...
- Cut down on interest. ...
- Make a deal. ...
- Keep saving.
How to afford a good car? ›
As a general rule of thumb, many experts suggest following the 20/4/10 rule, which holds that you should set aside 20% of a car's purchase price for a downpayment, take 4 years to repay your car loan, and ensure that your monthly transportation costs don't exceed 10% of your monthly income.
Can I afford a $60,000 car? ›
The 35% rule states that the most that you should spend. on the price of a car. is not to exceed 35% of your gross income. That means if you make $40,000 a year, the cars price should not exceed $14,000. If you make $80,000, the cars price should be below $28,000.
What car can I afford with a 100k salary? ›
50% of Your Income Across All Vehicles
Similarly, if your family earns $100,000 per year total, the total value of all of your vehicles shouldn't be worth more than $50,000.
What's a good down payment on a 30k car? ›
Consider putting at least $6,000 down on a $30,000 car if you're buying it new or at least $3,000 if you're buying it used. This follows the guidelines of a 20% down payment for a new car or a 10% down payment for a used car.
What devalues a car most? ›
Cars can lose a large portion of their value the moment you drive them off the lot. High-end luxury cars tend to depreciate the most. Factors that determine the rate of depreciation include mileage, quality, design, and consumer whim.
The 10 slowest depreciating cars of 2023 according to WhatCar Magazine are as follows:
- Porsche 911. ...
- Volkswagen California. ...
- Mercedes Benz G Class. ...
- Land Rover Defender 110. ...
- Porsche Macan. ...
- Land Rover Discovery Sport. ...
- Porsche Cayenne. ...
- Lamborghini Urus.
What is the most sought out car? ›
1. Ford F-Series. The Ford F-150's offers the best attributes of a modern pickup: power, efficiency, comfort and capability. Add to that a huge range of configurations and options, and you've got the best-selling vehicle in America for 2023.
What car has the least problems? ›
What is the most reliable car brand?
- Lexus. The son has dethroned the father from the top of the reliability rankings. ...
- Toyota. Even though it was knocked to second place by Lexus, Toyota is not complaining. ...
- Mini. ...
- Acura. ...
- Honda. ...
- Jeep. ...
- Volkswagen. ...
- Rivian.
How many miles is too many for a used car? ›
Often, 100,000 miles is considered a cut-off point for used cars because older vehicles often start requiring more expensive and frequent maintenance when mileage exceeds 100,000.
What is my best option for buying a vehicle? ›
Decide whether you want to buy or lease
Do you want to drive the car as long as the wheels can stay on? If so, buying is the way to go, and you'll have the ability to trade or sell the vehicle when you want a fresh set of wheels. However, if you want a new car every three years, consider leasing.
What to know before choosing a car? ›
Before going to the dealership:
Consider the overall cost of ownership, including gas mileage, maintenance and repairs, insurance costs, and depreciation. Check consumer publications, the Internet, and car magazines for information on models and prices. Read the California Car Buyers' Bill of Rights.
What's the most important factor when choosing a car? ›
Reliability and Durability. For 3 consecutive years, reliability and durability are the most common reasons for selecting a particular model. Interior Comfort. A relaxed ride is the second-most-frequently cited reason in vehicle selection.