Now more than ever, owning a motor vehicle is a luxury. The average used car runs for a hefty price tag of $21,558, USA Today reveals. Plus, the global pandemic is only driving that price up.
This rise in car prices comes at a time when many Americans are failing to pay for basic necessities, like food, utilities, and rent. For these Americans, a car without a prohibitive and costly monthly payment can make all the difference in the world. Linda Bianchi from Springfield, MA is one such person.
On Nov. 26, Mass Live reported that the non-profit Good News Garage gifted Bianchi, a Massachusetts Rehabilitation Commission (MRC) recruiter and adult assisted living worker, with a 2009 Pontiac Vibe. In tears, Bianchi explained that the vehicle will secure her livelihood as her role requires her to drive “around the greater Springfield area to food pantries, shelters, senior centers, shopping malls, churches — wherever seniors get together,” Mass Live continues.
The non-profit Good News Garage works with donors and mechanics to support its programs “Wheels to Work” and “Ready To Go,” programs that provide well-maintained used vehicles to individuals who need reliable transportation to and from work or to “essential life activities, such as school, healthcare, and childcare,” according to the non-profit’s official webpage.
Unfortunately, not all Americans in need have access to these resources. If you are among the many Americans going it alone and doing what you can to afford a new or used vehicle, do it the smart way. Follow these tips to make purchasing a car as affordable and practical as possible. Here are the top factors to consider when buying a car on a tight budget.
Purchase Options: New, Used, Or Lease?
If you are purchasing a new vehicle and doing it on a budget, is it best to buy a new vehicle, a used vehicle, or to lease a car?
Financially, a new car can make sense even on a tight budget for a few key reasons. Consider these factors when buying a car and determining whether to buy it new or used. First, a new car will require significantly fewer repairs. According to AAA, the average repair sets drivers back as much as $500 to $600. Completing major repairs and doing it often can be prohibitively expensive. Should your engine fail, for example, replacing the engine can cost as much as $7,000 to $10,000 — in some cases, that is the same as the cost for a small used vehicle. Purchasing new will avoid major repairs and even most minor ones as long as you properly maintain your vehicle. Plus, buying new may help you score a lower interest rate, which ultimately means you will pay less for your vehicle over time.
Of course, there are many advantages to buying used vehicles. Purchasing new or used is one of the most important factors to consider when buying a car. As previously stated, new vehicles require fewer repairs and come with lower interest rates. What are the advantages of purchasing used cars? The obvious perk is that used cars cost less and many of them are surprisingly reliable, lasting for more than 100,000 miles before breaking down or requiring expensive repairs.
What’s more, on average, it is significantly less expensive to insure a used car. “When a vehicle is worth less, it costs less to insure it when you’re buying collision and comprehensive coverage,” NerdWallet writes. Plus, there is also the option to forgo these types of insurance altogether, and purchase the minimum insurance required — typically liability insurance — instead.
Leasing a car is another worthwhile option. “Leasing a car usually results in monthly payments that are 30% to 60% lower versus buying a car,” according to Real Car Tips. As with new vehicles, there are fewer repairs and lower repair costs, and some drivers may be able to write off leased vehicles on their taxes if they use them for work-related purposes. Just as there are many different factors to consider when buying a car, there are factors to consider when leasing a car as well. While it is generally cheaper, many dealerships require exceptional credit to lease a vehicle.
Whether you purchase your car new or used or lease a vehicle, it is important to explore your options and choose the best possible vehicle loan program. When buying a vehicle, most drivers will put a certain amount of money down. Banks or credit unions will use that downpayment and your estimated interest rate to determine your monthly car payment. Your interest rate and monthly payment will vary by provider. Do not settle for the first quote. Get several estimates and shop around for the best rates. Put more money down to lower your monthly payment.
The Basics: Gas, Repairs, And Maintenance
Some other factors to consider when buying a car are the costs of gas, maintenance, and repair.
Cars are essential for getting us to and from the grocery store, work, and medical appointments with a primary care doctor. For that reason, it is important to keep cars in tiptop shape — or at least well-maintained enough to get us from point A to point B. That means getting regular oil changes, rotating or replacing tires as necessary, and keeping gas in the tank. Of course, that costs money. Exactly how much does it cost?
Here is a rundown of basic car maintenance and upkeep expenses:
- $636 to $1,343. The average price of gas varies by state. According to Business Insider, New Yorkers pay just $636 per year on gas, whereas drivers in Maine may spend as much as $1,343. New York’s large urban centers, like New York City, have extensive public transportation systems, which likely drives down the average amount of fuel used.
- $35 to $75. This is the cost of an oil change as long as your car uses conventional oil. If your car uses synthetic oil, Kelley Blue Book (KBB) recommends budgeting $65 to $125 for an oil change. Depending on your vehicle, it is generally wise to get an oil change once every 3,000 to 5,000 miles. Check your car manual for recommendations based on your specific make and model. For buyers who are truly pinching pennies, oil type is another one of the factors to consider when buying a car.
- $50 to $150. Minor repairs, like chipping paint, small cosmetic fixes, minor windshield repair, and dent and dings will set you back an average of $50 to $150.
- $500 to $10,000. Timing belt repair, fuel pump repair, brake line repair, and hybrid battery repair all get pricey. These services can range from $500 to $7,000. A new engine will cost you up to $10,000.
The last thing you want — or need — is for your car to break down when you need it most, like on your way to an urgent care center during an emergency. Keep your car running at its best by budgeting for the above expenses. Do not overlook basic costs as one of the top factors to consider when buying a car.
Car Insurance: Make Sure You’re Protected
Another one of the big factors to consider when buying a car is auto insurance. All states require at least some insurance — typically personal liability insurance — to legally keep your car on the road. Keep automotive insurance costs low by:
- Maintaining good credit. For the best insurance rates, keep an eye on your credit. A good credit score is one of the most important factors when buying a car and when purchasing insurance. Maintain a good credit score by paying bills on time, paying more than the minimum payment on your credit cards, and paying off debts whenever and wherever possible.
- Shop around for the best insurance policy. Just like it is wise to shop around for the best auto loan, it is best to get several estimates or quotes in order to find an optimally priced insurance plan. Prices vary by carrier, vehicle, and state. Call several different carriers to find out who has the most reasonable price.
- Bundle your insurance. It may be possible to bundle your auto insurance with your home insurance. In many cases, doing so will score you a better rate, as providers will reward you for your loyalty.
- Seek out appropriate discounts. You may be eligible for discounts for low mileage or the completion of a safe driving course. Ask your provider about possible discounts.
The Inside Of Your Car: Who And What Will It Need To Hold?
Of course, one of the key factors to consider when buying a car is how you will use it. Who will be in your car on a regular basis? What do you need to transport back and forth?
Keeping your costs low is only practical if you purchase the right vehicle to meet your needs. For example, a four-door sedan may be perfectly suitable and appropriate for driving back and forth to work and for occasionally taking your cat or dog to the vet.
If you have a large family or you frequently move and/or work on your house, it is well worth your money to invest in a vehicle that is much larger and utilitarian, like an SUV or a truck.
Cut costs where possible, but don’t sell yourself short. Save up enough funds to buy a car that meets your immediate needs.
Accidents: Will You Be Able To Afford Help When Necessary?
In addition to saving for insurance, maintenance, and upkeep, it is wise to make plans should the worst happen. According to the National Highway Traffic Safety Administration (NHTSA), a car crash occurs once every 60 seconds. The average driver will experience three to four car accidents, Forbes continues. While it is not necessarily something we like to talk about, collisions are a fact of life and it is critical to prepare for them.
Ideally, financially experts recommend keeping three to six months’ salary in an emergency savings fund. Unfortunately, for many, that amount is just not practical. An amount equal to one month’s salary can go a surprisingly long way. If even that is out of the budget, consider the average cost for medical expenses and car repairs. The average deductible is $1,655, according to Experian, and typical car repairs following an accident run from $1,500 to $3,000. As such, it is wise to have at least a little over $3,000 in savings to pay for medical expenses, repairs, and a car accident lawyer, should you need representation in or out of court.
The Extras: Priorities Versus Luxuries
Determine what extras are priorities and which ones are luxuries. For example, while a car wash may seem like a luxury at first, there are several disadvantages to letting your car accumulate too much dirt and filth. Without semi-regular washing, the finish on your car will fade and it may even be susceptible to damages, like rusting.
Similarly, you may not initially think about storage or garage door repair when you are considering factors before buying a car. Keeping a car outdoors in severe weather, like major storms and extremely cold winters, can do a great deal of damage to your car. To keep your car running at its best, it is important to keep the engine and critical elements of your vehicle warm overnight. That means parking your vehicle in a warm garage without air leaks. Invest in necessary garage repairs before buying your vehicle or — at the latest — before the thick of winter. Similarly, keeping a car in a garage prevents flooding and water damage during major storms. A flood-damaged car is extremely expensive to fix. Avoid these problems altogether by storing your car in a warm, dry place.
There are many factors to consider when buying a car and when doing it on a budget. Consider whether it is best to buy or lease your vehicle, take steps to keep insurance costs low, budget for maintenance and repair costs, and plan for emergencies and extras, like car accidents, car washes, and storage.