How to Buy a Car on a Budget [VIDEO]
Looking for a new car? Do you have a budget you want to stick to? From researching purchase prices to calculating your monthly vehicle expenses, watch as personal finance author Stefanie O’Connell shares some budget-friendly tips when shopping for a new ride.
STEFANIE: Hi everyone, personal finance author Stefanie O’Connell from stefanieoconnell.com here, sharing some practical strategies for buying your next car on a budget.
STEFANIE: Before you head to the dealership and get your heart set on a sleek new ride, calculate how much car you can actually afford.
STEFANIE: Think about it this way. If you’re on a diet, do you wait until you’re starving and sitting at the restaurant to decide what to order? Not unless you want to get the pasta with a side of breadsticks. But if you want to stick to your calorie goals, you make your decisions beforehand, when you’re not hungry and won’t be persuaded by a food craving.
STEFANIE: The same concept applies when car shopping.
STEFANIE: When you get to the dealership and slide behind the wheel of some shiny, new car, you’re not thinking about your budget or five-year financial plan. You’re thinking: this car is awesome and I want it now.
STEFANIE: So, before you go for a test drive or even visit the dealership, do your research online. And remember, the less you spend on your car, the more money you can have left over to spend on everything else.
STEFANIE: If you’re going to buy your car outright, try to spend less than 20 percent of your annual income, says Edmunds. So, if you make $70,000 a year, your maximum budget for your new car would be $14,000.
STEFANIE: If you’re financing your new vehicle, your primary goal should still be to keep the sum of your monthly auto expenses below 20 percent of your monthly take-home pay, adds Edmunds. This should include repairs, registration, insurance and other fees like parking, on top of your monthly payment. So, if your take home pay is about $3,800 a month, your total monthly transportation budget is $760. Make sure to take into account factors like the cost of gas and maintenance when figuring out the true final price tag.
STEFANIE: The more you know what your monthly payment will be before you head to the dealership, the less likely you are to be blindsided by added costs during your purchasing negotiations.
STEFANIE: You can also look at websites like Kelly Blue Book and Edmunds to find out price ranges for the cars you’re interested in as well as more information on competitor models, safety standards and recalls.
STEFANIE: Don’t forget buying a used vehicle can be another option to help stick on a budget, just be sure to get the vehicle history report, says Edmunds, so you can review the ownership history, service points and accident record. You may also want to consider getting an independent vehicle inspection as it may help uncover hidden problems, which may impact future maintenance costs and the current value of the vehicle, adds Edmunds.
STEFANIE: For more ways to help save on your next major purchase visit allstate.com/blog and follow me @stefanieoconnell.