Thinking about buying a car? Here’s what auto experts say you need to know
Where to start the car-buying process
A new buyer’s first step is to determine the sort of vehicle they need, and their budget.
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.
“Think about your actual needs, how long your commute is, how much you have to carry, and if you actually enjoy driving and might want something sporty,” said Ronald Montoya, the senior consumer advice editor and content strategist at Edmunds. “Avoid overbuying – you can probably get by with a smaller vehicle for most of your needs, and just rent something bigger once or twice a year, when you really need it.”
How to pay for an automobile
Buying a vehicle outright – often called paying cash for the car, even though it’s more likely to involve a cashier’s check or credit card rather than a literal wad of cash – lets consumers avoid monthly payments and thousands in interest. But it’s not for everyone. Many people just don’t have the savings, plus dealers make money off of financing and are less likely to negotiate on price for buyers paying cash.
“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 “But don’t deplete your emergency fund just to buy the car.”
Besides paying cash, shoppers can also turn to leasing or loans.
With leasing, consumers generally make lower monthly payments, but don’t own the vehicle at the end of the term – typically three years – unless they pony up a big lump-sum payment. “Leasing is often a treadmill of payments,” McBride said. “You’re essentially renting the vehicle and at the end of the lease you return the car and start over on a new one.”
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).