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Car Buying

Buying a Car: Tips for Staying Within Your Budget

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author photo by Doug DeMuro

If you're interested in buying a car, it's easy to be awestruck by all the great new designs out there and the futuristic new equipment that many models are now offering. The only problem? In all your excitement, it's also easy to get carried away and spend too much. Fortunately, we have a few tips that will help you stay within your budget when you're choosing your next new car.

Set a Budget and Keep It

This one can be hard for many buyers, but it's important for shoppers who don't want to spend too much on their next car. Simply put, we suggest that you set a budget and keep it -- and don't go over it under any circumstances. This is especially good advice if you're the kind who's easily swayed by exciting new options that can unnecessarily add to your car's bottom line. With a set budget, it'll be easier to talk yourself down when the time comes to add more options.

Look at Total Price, Not Base Price

One common mistake made by car shoppers is that they look at a car's base price rather than its total price when they're trying to purchase a new vehicle. This is a mistake because you rarely pay the base price. Instead, you have to consider a car's total cost with options when you're budgeting what you'll be paying for a vehicle.

As an example, consider a car that starts at $23,000 but is upped to $25,000 with options. This isn't a $23,000 car; it's a $25,000 car, and it's important to think of it that way. Otherwise, it's easy to tell yourself that this car fits in your $23,000 budget when, in reality, the out-the-door price is much higher.

Remember Taxes and Fees

Remember that the final purchase price of any car will include taxes and fees that aren't mentioned on the window sticker. For example, if your state sales tax rate is 7 percent, expect to add an additional 7 percent on top of the car's purchase price for taxes. Similarly, you may have to pay dealer fees such as a documentation fee or a title fee on top of the purchase price. Cars also have a destination charge that's included on the window sticker but is sometimes left out of prices you see advertised online.

Our advice: Don't forget these fees when planning your budget. If you're not looking to spend more than $30,000 for a car, for instance, it's probably not a good idea to choose a vehicle that costs $29,995 unless you can negotiate the price down substantially so that it'll fit in your budget after taxes.

Think About What You Need

Cooled seats are a great feature. But do you need them on your next car, especially if they're part of a package that costs $2,000? Before you begin the research process for buying a new car, spend some time thinking about what features you really need. That way, it'll be easy to figure out exactly what you want to eliminate when the price tag on the car you want ends up a little too high for your budget.

Another idea: Make a list of features that would be nice to have. If you have any extra money left over after taking care of your needs, you can add some of these items to your car and still be within your budget.

Focus on the Price, Not the Payment

Another big tip when it comes to staying within your budget is to not focus on the monthly payment. Thinking about payment terms can be distracting, since dealerships can change the loan term, the down payment and other factors to send a car well over your budget without you realizing it.

Instead of focusing on the payment, we think the smart thing to do is to consider the purchase price. This is one simple number, and once you've come up with a dollar amount that you can afford, the monthly payment should fall into line with your budget.

Don't Forget: Stay Smart

Our best piece of advice when it comes to buying a car is to simply stay smart. Set a budget and stick to it -- and don't start adding unnecessary options. More importantly, remember to consider the total price, not the base price, and don't forget about a car's taxes and fees. Finally, keep the purchase price in mind rather than the monthly payment. Follow these steps, and you'll have no trouble staying within your budget on your next car purchase.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
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Buying a Car: Tips for Staying Within Your Budget