It’s a question that all of us struggle to answer at some point: Am I ready to buy a new(er) car?
Sometimes we face that question when our current car has had one too many breakdowns, and we’re tired of spending money on repairs.
Other times we want to get ahead of the game and purchase a car because our current one is older and has a lot of miles.
And there are other occasions when we look to purchase another car out of necessity, or just that it’s time to replace our current one.
Regardless of the reason, there are several things to consider if you are looking to buy a new(er) car.
1. To borrow or not to borrow. It’s always best not to borrow when purchasing a car—if possible. Instead, start with what you can afford without borrowing and then save for future purchases. If you must borrow, keep it to a minimum and pay for it as quickly as possible, so you can start saving for needed repairs or even your next car.
2. New versus used. Generally, used is a better financial decision for several reasons. New cars tend to depreciate quite a bit in the first two to three years—perhaps as much as 40%. You can save all that initial depreciation by buying used.
Additionally, there are other expense considerations. If your state charges sales tax, paying more for a new car also means paying more sales tax.
Insurance costs will likely be higher for new cars. In some states, the annual vehicle registration tax is higher for newer cars.
At least in theory, an older car will cost more to maintain, especially if it is no longer under warranty. It’s always a good idea to have a trusted mechanic perform an inspection on the car before you purchase it.
Finally, fuel efficiency may be another factor to consider, especially if you drive a lot.
3. Ongoing maintenance costs. When buying a car—whether new or used—it’s important to budget for ongoing maintenance costs. The amount needed can vary based on several factors. However, setting aside $50-$100 a month per vehicle is good planning.
Your situation will likely determine which of these tips is most useful. Cars tend to be one of the more expensive investments we make—either new or used. It’s important to fully consider your options and make reasoned decisions in light of your financial situation, your need for a car and your ability to pay for ongoing maintenance.
Making wise investment decisions will not only help you now but also in the long run—when surprise financial commitments can put you in challenging situations.
CIF offers several investment options that provide good returns while also helping grow God’s Kingdom.
To find out more about these options, call 800-995-8574.