100 Tips for 2011 » 10 car-buying tips for 2011
New or used, buying a car is expensive. In fact, it's the second-most expensive purchase that most consumers make next to a home. Strong research is the key to buying a car that doesn't make too big of a dent in your wallet. Here are 10 things to do before you head off to a dealer's lot.
Determine your budget
Don't head to a dealer's lot until you've decided on a budget. Start by using the home budget calculator
to find out how much you can really afford. In general, aim to spend no more than 20 percent of your monthly household income on all costs associated with all of the cars in your household. That would include the cost of monthly payments, insurance, repairs, maintenance and fuel.
Don't assume you need to buy used
Thanks to strong demand for used cars, they are more expensive than ever and it's harder to get a good deal. In addition, there are now more inexpensive new cars coming to market than in the past. In fact, there are more than 20 different new cars that have an MSRP of $15,000 or less.
Since interest rates are higher on used cars, you'll spend more in the long run on interest for a used car than a similarly priced new car, so the new car may actually be the wiser financial choice. To help you decide, read Bankrate's story on buying a car with $15,000.
Research your car choices
You've probably already spotted some cars on the road that interest you, but take some time and research
all your car choices. You'll be logging a lot of "seat time" behind the wheel for the next several years, so don't rush into a decision. Use the automaker websites and third-party, vehicle information sites such as Edmunds.com
, KBB.com and NADAguides.com
to get pricing information and learn about available inventory in your area. Visit local dealerships only after you've completed the majority of your research and have just a couple of cars in mind
Look at the total cost of owning the car
Cars whose monthly payment represents your total monthly budget will automatically put you in the red financially because you'll be over your budget when you factor in ownership costs. Choose cars that are at least 5 percent less than your monthly budget to give yourself some room to cover costs, including fuel, car insurance
, repairs and maintenance.
Assess your actual insurance costs
Your actual cost of car insurance can vary widely, depending on your personal driving record as well as certain household situations such as whether you have a teen driver. Once you have a few cars in mind, ask your current car insurance agent for quotes on all the cars you are considering and factor those numbers into your overall budget. To get an accurate quote, be prepared to tell the car insurance agent the exact make, including model, engine size and type, and specific options.