#IsItWorthIt #NewCarPurchase #CarBuyingTips
##### Factors to Consider Before Purchasing a New Car
Are you contemplating buying a new car but unsure if it’s worth it? Making such a major financial decision can be daunting, especially for first-time buyers. Before you take the plunge, consider these factors to determine if purchasing a new car is the right choice for you.
###### Budget Constraints:
One of the most crucial factors to consider when buying a new car is your budget. Evaluate your current financial situation, including your income, expenses, and savings. Determine how much you can comfortably afford to spend on a new car without straining your finances.
– With a gross income of $6400 and a net income of $5600, you have a healthy financial standing.
– Taking care of your mom and child adds to your monthly expenses, so be sure to factor in these costs when setting your budget.
– With $20,000 in savings, you have a solid financial cushion to cover unexpected expenses that may arise with a new car purchase.
###### Credit Score and Interest Rates:
Your credit score plays a significant role in determining the interest rate you will receive on a car loan. A credit score of 700 is considered good and should help you secure a favorable interest rate, especially with a cosigner.
– Consider shopping around for the best interest rates to ensure you get a competitive loan offer.
– A higher credit score can save you money in the long run by reducing your interest payments.
###### Value Retention and Resale Potential:
New cars depreciate quickly, losing a significant portion of their value within the first few years. Consider the value retention and resale potential of the car you are interested in buying.
– Research the depreciation rates of different car models to choose one that holds its value well.
– Factor in how long you plan to keep the car and whether you are likely to sell it in the future.
###### Insurance and Maintenance Costs:
Owning a new car comes with additional costs beyond the purchase price. Be sure to budget for insurance premiums, maintenance, and repairs.
– Get insurance quotes for the car models you are considering to estimate ongoing costs.
– Consider the manufacturer’s warranty coverage and maintenance schedule to understand the long-term costs of ownership.
In conclusion, purchasing a new car can be a worthwhile investment if you carefully consider your budget, credit score, value retention, and ongoing costs. With a solid financial foundation, a good credit score, and thorough research, you can make an informed decision that aligns with your financial goals and lifestyle. Happy car shopping! 🚗
Do you have an emergency fund of 3-6 months expenses aside from the $20k in savings? If not I wouldn’t use that money for a car. I would start saving separately, specifically for the car purchase and try and purchase something in cash. From your numbers it sounds like you can save around $3,100 per month, so it shouldn’t take you more than 6 months to save enough to buy a new-used car for cash.
>I am a first time buyer so I know that the interest rate will be high.
That’s a great reason to either save up and buy a car with cash, or, consider lower cost solutions to this problem. If repairing your mother’s car is cheaper than buying her (or you) a different used car, that’s the place to start.
If you get a car there are some basic guidelines:
20% down
No more than 8% of income
Need to pay off in 3 years or less – depreciating asset.
You do you. No one can tell you what to do but finance rules are there to guide us and help us be financially smarter.
Do you live in the US? If so I don’t think you’re withholding enough for taxes
With the listed income, expenses, and credit, I doubt you’ll have much difficulty. You also mentioned in a comment that you’re hoping to buy a home in a few years, so having an auto loan now can help you build up a credit history.
There are several different camps when it comes to buying a car. Some people will tell you to go as cheap as you can. Some will just say to buy used and pay cash. Personally, I always buy new (you’re paying all the depreciation, but we keep our cars for a long time and don’t have to worry about their past history) and take advantage of interest rate promotions (we’ve always paid under 5%). Ultimately it’s all about trade-offs: would you rather have a car now or later, would you rather have something cheap or something reliable.
Side note: depending on where you live and how much you drive, we’re in the weird situation that leasing may also be a reasonable choice. In Colorado, for example, you could recently lease a 2025 Leaf and drive it up to 10k miles at a total cost of just under $2000 for two years.
This is the one area of life I’ve always ignored. You can’t put a price on reliability and stability. Well, you can, but often times it’s worth that price. Just be smart about it.
Purchasing a base 2024 Civic at ~24k or whatever is worth it. They’re cheap to maintain, produce insane MPG, and realistically, it’s a car you can pass to your child when/if needed. You can keep it for literal decades.
Purchasing a new 100k truck is absolutely stupid (unless you’re there/have a valid reason for it). If you want a truck, go with something like a new Tacoma, which will run you ~30k-33k, but they hold their value like no one’s business.
When in doubt, remember: research, research, research.
No cosigner. Cosigner is bad. Very bad for both of you, especially the cosigner. Never be a cosigner without learning how “several liability” works and what it means for your credit.
Seems like you need one reliable car in the family. That is a valid need. Just ensure that you meet your obligations, pay bills and have money left over for unexpected issues.
Can I ask how are you netting so much from 6400? Seems odd, are you sure you won’t owe taxes come April?
Its never worth it to buy a new car, only rich people do it because they have nothing else to spend on and dumb people because they dont know better lol. And honestly at your income its especially not worth it. But i think you can still afford a nice 2 year old used toyota honda or mazda (stay with those brands they are the most reliable at the moment). I would say you could buy new if you werent a mom and could look at yourself in the mirror knowing you are doing something dumb just because you want to (you are allowed to do that as an adult lol), but with a child you need to prioritize that first before having a 2025 model car vs a 2022 model car
> interest rate will be high,
Not necessarily, as we move into August, more and more Manufacturers will be offering 0% on new cars; from the previous model year, still new. That difference in what you might have paid in interest, thousands, just might offset the new car depreciation. Plus you have a warrenty etc.
Take your time and plan to purchase in August and investigate what you like now. Since its new, I recommend to not skimp on features but get something you will enjoy for the long run.
If have good credit and income, it doesn’t really matter that you’re a first time buyer. My first two cars were at 0% and 0.9%. If they are new, it’s fine, maybe ideal, to go for a 5 year or even longer term.