You’re walking across the stage soon to receive your diploma, and now it’s time to journey into the real world. Buying a car may be a part of the plan if you are going to live in an area where public transportation isn’t the best way to get around. But before you head to the dealership to pick out the perfect ride, do your research and get preapproved for an auto loan so you can shop with confidence.
Choose the car that’s right for your lifestyle post-graduation
The thought of purchasing your own car is exciting. However, you must avoid getting sidetracked, or you could choose a vehicle that fits your style but isn’t practical.
How long is your commute to and from work? If it’ll be lengthy, you may want to narrow your search down to cars that have good fuel economy ratings — especially with how gas prices are trending.
It’s currently around $3.70 per gallon for regular fuel, according to AAA, which is slightly lower than last month’s average of $3.96. Still, this figure is much higher than the average price per gallon of $3.18 just one year ago.
Visit the U.S. Department of Energy’s site and use its online tool to view the average annual fuel costs for any vehicles you are considering. You can narrow your search down by year, make and model, or view recommendations for the most fuel-efficient cars.
Size and add-ons
Will a compact car suffice, or do you need something bigger, like a crossover or pickup truck? What about features — are certain ones a “must-have” on your list?
If you recently landed a job with a good salary that you will start after graduation, you may be able to afford a car with the latest technology and features. Still, you could be better off with a smaller ride without all the bells and whistles until you begin work and get more established in your career.
How safe is the vehicle you’re considering? Request a copy of the vehicle’s Carfax report. It includes maintenance records and discloses if the car has been involved in any accidents.
The National Highway Traffic Safety Administration’s website is another good resource. You can search safety ratings and check for recalls by entering the vehicle’s make and model or VIN.
Decide between new and used
There is a lot to love about a new car. It’s shiny, in tip-top shape and smells good. But the reality is some used vehicles are just as reliable. Plus, you could purchase an extended warranty for around $1,500 and have added peace of mind knowing you’re protected in the event of a major mechanical breakdown.
Consider the following when deciding between a new and used ride:
- New cars come with a manufacturer’s warranty. This coverage could save you a lot of money if your car breaks down and requires major repairs in the first few years of ownership.
- New cars often have all the latest technology. However, you may find a slightly used car with your desired features.
- Some used cars can have low mileage. So, you shouldn’t have many mechanical issues for some time, maintenance costs will likely be lower and you’ll get a better deal.
- Some used cars are certified pre-owned (CPO). These are given the manufacturer’s seal of approval after being brought up to a set standard mechanically and have a limited factory warranty.
Think about the whole cost of car ownership
Beyond the monthly payment, fuel costs and auto insurance premiums, you should also factor in maintenance and repair costs. In 2021, the average cost of maintenance, repairs and tires was around 9.55 center per mile, according to AAA.
Still, these costs vary by vehicle, but you can use the Edmunds car maintenance calculator to get an idea of how much you may spend over time.
Annual registration renewal expenses, which generally range from under $20 to a little over $200 per year, are also a factor to keep in mind. Some states assess a flat fee, while others use your vehicle’s age, fuel efficiency or weight to calculate registration fees.
Research cars and get financed before going to a dealership
Most dealerships offer in-house financing, but it’s wiser to get preapproved for an auto loan before you start shopping for a car. You want to have a concrete idea of what you can actually afford, and quotes from your bank or credit union will help you decide on a purchase price that works.
You’ll also have more leverage when negotiating the purchase price. The deal won’t depend on your ability to secure financing through the dealership, and you can behave like a cash buyer.
Understand the benefits of buying vs. leasing
There’s a lot of chatter around buying versus leasing and which option is better. Here are some benefits of both options to consider:
- Lease payments on newer cars are typically more affordable. If your eyes are set on a particular vehicle that is a bit pricey, you may be able to afford the monthly payments if you get a lease.
- You’ll get a manufacturer’s warranty when you lease a new car. It typically covers you for up to 36,000 miles or three years, so you won’t have to worry about spending a fortune on repairs if a mechanical issue comes up.
- There are no mileage restrictions if you buy a car. But if you decide to lease, you will be limited to anywhere between 10,000 and 15,000 miles per year or risk racking up excessive mileage fees. They can cost you between 10 cents and 25 cents per mile or more, depending on the terms of the lease agreement.
- You’ll own the car once the loan is paid in full. Lease agreements operate a bit differently, though. You’ll have to return the vehicle to the dealer when the lease ends unless you opt to buy it out.
Ultimately, buying a car in college is one of the biggest purchases you will make. To ensure you get the best deal, you want to do your research to find a ride that complements both your lifestyle and your budget. It is equally important to get preapproved for financing before you visit any dealerships and weigh the benefits of buying versus leasing to decide which option is best.