So, you’re graduating from IU and you need a car. Or at least you think you do. But do you really?
Cars cost a lot of money to buy, run, and maintain. Before you head to the car dealership, it pays to take some time to weigh your options.
Your knee-jerk answer to that question was probably, “I need it.” But have you looked at viable alternatives?
If you are or will be living and working in a city with buses, subways, or other mass transit options, utilizing them could save you a ton of money. A monthly bus pass or metro card is likely far cheaper than the payment on any car you can buy.
If you really do need a car, be sure to set realistic expectations and keep your budget front and center when deciding what to buy. This might mean you end up with a decidedly unglamorous vehicle, but hey, it’s your first car. It’s better to start at the bottom and work your way up to a flashier model (you’ll appreciate it way more when you get it).
Try to keep your transportation costs to no more than 15% of your income.
If, for example, your annual projected salary is $35,000 for the year and you have student loans to pay, this is what you could be looking at:
Annual Salary: $35,000—Taxes and student loan payments ÷ 12 months
Monthly Salary = $1,500
15% of Salary = approx. $240 per month for transportation expenses
Not sure how much you can expect to make? Use this calculator to get a rough idea.
With the convenience that often comes with owning your own car (faster transportation, not having to stand outside in the snow, etc.), it’s easy to forget the additional expenses that accompany it.
If you buy your own car, you will want to make room in your budget for additional expenses like:
There’s more than one way to get behind the steering wheel of your own car. You can buy new or used, or you can lease.
Leasing a car works much like renting an apartment. You put down a security deposit and make monthly payments for a set amount of time. At the end of your lease, you simply turn it in!
If you do decide to buy your vehicle, remember dealerships aren’t your only options. Be sure to look in the paper for private sellers and check online as well.
How much is that car really worth? Kelley Blue Book is the most reputable source for finding actual prices for new and used cars. You can also check sites like truecar.com, which do some of the negotiation for you.
Edmunds.com has a tool that helps you estimate the five-year cost of a vehicle. This tool comes in handy if you are comparing cars and trying to determine which one will cost you less over time, even if their sticker prices are different.
The more options you want, the higher the cost of the car. It’s often easier to negotiate a reasonable price for frill-free base models.
Be sure to ask about warranties and maintenance provided to you with the cost of any car, used or new. A good warranty can save you money in the long run.
Before you sign on the dotted line, make sure you have the details straight.
Cheaper isn’t always better. Opting for a less expensive model could end up costing you if you find yourself filling up the tank twice as often or shelling out more in maintenance costs.
If you can fit it within your budget, car ownership a great way to build your credit, but it comes with its fair share of expenses. So, before you sign to buy or lease your next car, do your research, assess what you truly need and what you can afford, and be moneysmart about your decision.
