1) Budget First
Calculate 20 percent of your net income—that should be your maximum budget for monthly car payments and related expenses such as fuel, maintenance, insurance, tolls and parking.
Online tools, including gas and loan calculators, can help you estimate these costs. You need to figure out how much you’ll need to pay out early on to determine whether you can handle the total financing cost. “Financing a car can be a great way to build credit if managed properly. So it’s important to ensure your monthly payment is affordable,” says Cari Crane, senior industry insights analyst at TrueCar.
2) Think “New To You”
In 2016, the average price for a new compact car was about $22,000, compared with $14,000 for its three-year-old model. Considering the lower price, a used car that runs well can be a smart move, says Crane. You’ll spend less up front and keep more of your investment by skipping the rapid depreciation period on a new car—which typically loses around 33 percent of its value in the first year. When researching car prices, Crane stresses the importance of using reputable sites, like the GEICO Car Buying Service powered by TrueCar, that provide price-point comparisons by showing you what others paid for similar models.
3) Built-In Savings
If you’re moving to a big city, space-saving compact cars can be a great option because they’re easy to park and can offer good fuel economy over time. The chance to save money on gas long term can make hybrid and electric vehicles attractive choices, says Crane. However, saving down the road will often mean spending more up front. “These cars tend to be pretty pricey when they’re new,” she says, “so it may be best for those on a budget to look for used models.”
4) Get Insurance!
While you’re shopping around, keep in mind the many factors that can reduce your auto insurance premium—and lower your overall monthly car expenses. For instance, less expensive cars can be cheaper to insure, and features like anti-theft devices, airbags and antilock brakes could help reduce your premium even further. Being a safe driver could also save you up to 25 percent; and being a good student could knock off as much as 15 percent off your bill. Need help figuring out which insurance discounts are best suited for you? Get a fast, free quote online or talk to a GEICO agent about programs for young drivers that could offer protection with the least damage to your wallet.
Before you head to the dealership, visit the GEICO Car Buying Service so you can see what others paid for the car you want and know you’re getting a fair price.
By Nicole Cherie Jones