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So You Think You’re Going to Buy A Car

by Chuck Bentley September 4, 2017

About 43% of the entire adult American population has a car loan (that’s about 107 million people). What’s even more shocking is that 6 million of those people are 90 or more days late on their car payments.

They’re essentially taking out loans for an item they can’t afford, but still can’t afford to make payments on their loans. This creates a cycle of debt, stress, and bondage.

Sadly, after the Great Recession, mortgages became more difficult to acquire and car loans (and credit cards) became easier. This means high interest rates, loans, and debt are being sold with little concern for the long-term effects on individuals or the economy. If you’re feeling overwhelmed by your credit card debt, get in touch with Christian Credit Counselors. They’ll get you started with a free debt analysis and help you develop a debt-payoff plan.

So what’s the right way to buy a car? What does stewardship look like when it comes to a Jetta vs. a Jaguar?

Things to Remember

First, let’s set the framework for the car-buying process.

  • A car depreciates in value and should be considered on par with buying an appliance.

The second you drive it off the lot, it goes down in value. You just need something functional, reliable, and affordable.

  • An inexpensive, sometimes out of style, used car that gets you where you need to go will probably be the wisest option.

If you save money by purchasing a reliable eye-sore, instead of a sports car, you can later upgrade to a better car when you have the cash on hand.

  • The cost of the car goes beyond the price tag.  

You need to also consider maintenance, gas, repairs, etc. when purchasing a car. A great deal on a Land Rover may be met by astronomical repair costs down the road (literally). Do your research before purchasing any car. 

  • Keep up with routine maintenance.

This could save you thousands in the long run and help your car last longer.

  • Use the right kind of gas.

$2.1 billion is wasted every year on people filling up with the wrong kind of gas. Only certain engines are designed for premium gas, so check your manual and save at the pump.

Buying vs Leasing

The first question to ask when it comes to actually getting a car is to buy or lease?

I think leasing is a bad idea for most people, and here’s why:

Most advertisements make it seem like you can have the nicest, fastest cars for next to nothing by leasing them. Millennials especially favor leasing over buying for the simple reason that you can get more car than you could afford otherwise. But that’s not entirely true.

When you lease a car, you’re paying for the depreciation of a car that you don’t own and must give back, compared to buying a car outright in which you pay for the entire value of the car.

Most people would also point towards lower monthly payments as another benefit to leasing over buying. While your monthly payments on a lease will be lower, it’s not by much. The average monthly car payment on a car loan is $493. For a leased car, it’s $412.

Before you lease, ask yourself whether you are trying to get into something you can’t truly afford just to keep up appearances.

Galatians 6:4 advises, “Each of us should test our own actions. Then they can take pride in themselves alone, without comparing themselves to someone else.”

I would recommend you work to save up to pay cash for a reliable car and drive it as long as possible. Regardless of a good trade-in value, not having a car payment is always cheaper than having one.

New vs. Used

Now that I’ve hopefully made a case for buying instead of renting, it’s time to decide if you’ll be going to the used or new car lot.

As I mentioned before, the second you drive a car off the lot, it loses value (about 11%, in fact). You lose the nearly 25% of the car’s value in the first year you own it. Therefore, I’d rather buy a car while it’s still in good condition but won’t lose the most value – about 2-4 years old.

Always use caution when buying used cars, and spend a little extra money up front to make sure you’re getting what you pay for. My son was recently car shopping and decided to spend $100 to have a mechanic inspect the used car he was considering. It looked like it was in great shape, but the mechanic came back with a laundry list of issues, which would have cost up to $2,500 in repairs and maintenance in the long run.

Hybrid vs. Non

I was recently asked a great question about balancing the value of saving gas on a hybrid car with the expensive repairs and maintenance they often require.

Ultimately, I’d give the same advice I would about any other kind of car – do your research and understand the long-term costs involved with the kind of car you’re considering. Everyone in my family drives a Toyota, and has for 15+ years (this is no way an endorsement of Toyota. We’ve just found cars that work for us, and stick with them). We should keep them in excellent condition, know the costs associated with them, and save to be able to pay cash for repairs and maintenance.

The same goes for hybrid cars. If your Prius battery needs to be replaced, be ready to drop about $2,300. But if you’re saving $100 in gas every month, the car battery will pay for itself in less than 2 years.  

Buy Your Car

Now it’s time for the fun part! Car shopping and purchasing the right car.

I always recommend buying a car with cash. Don’t consider a car until you have enough cash on hand to pay for it, and all the fees that come with it, upfront. For most people, this probably means following a budget and setting some savings goals.

If you need to make a budget and start saving for your next vehicle, check out Crown’s Easy Guide to a Budget You Love. It’s a simple, step-by-step guide that will help you create a budget that actually works for you. You can also use the Savings Goal Calculator to know how much you’ll need to set aside each month to purchase the car you want.

Finding the right car at the right price can be a long and arduous task. What are some of your car-buying tips?

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