SA major right of passage for college grads is buying a car on their own for the first time. It may not be their first car, but it will be the first one purchased without a concerned parent involved. It will be the first one bought with their own money. It will be the first one reflecting their personal desires, rather than one based on a parent’s parameters of affordability, practicality and safety.
Sounds easy and fun, right? An adventure. In an ideal world where money was no object and wants trumped needs, buying that first car might be nothing more than a great adventure. For most college grads, however, the reality is, money is tight and a wish list is just that: wishes and dreams. In the real world, making a monthly payment must fit into a budget and we simply don’t always get what we want.
Whoa, now it’s real. Basically our advice to a collage grad is the same as to any car shopper: Before setting foot on a dealer’s lot do your research and line up your financing. Having said that, though, we’ve put together five things, or tips, to consider as you prepare to embark on your first car-buying journey.
New vs. Used
Who wouldn’t want a brand-new car? There are pluses beyond the new-car smell. All of the technology is up to date and it’s fully warrantied. Used cars are just someone elses problems, right? We don’t need to make a case for a new car. It speaks for itself. But today, you can find used cars that are in fine shape, deliver excellent fuel economy and are reliable. You might even want to consider a certified pre-owned (CPO) car that comes with a manufacturer’s warranty and other perks. Another great thing about used cars, of course, is that they cost less, and they’re also going to depreciate less over time.
Accordingly, if you can find a low-mileage, well-maintained used car, it could really work to your advantage. Think about it: You can afford it more easily, it’s still a nice car to drive, and when you’re ready to part ways with it, you won’t take nearly as much of a hit on depreciation.
It’s ultimately your call, but the moral of the story is, used cars are more viable than ever; so we think they merit close consideration.
Lease vs. Buy
The rule of thumb on leasing a new car — at least according to many parents we know — is you’re paying something and getting nothing. But we’ve got a slightly different perspective on this. When you graduate from college, especially in these tumultuous times, it’s hard to say where you’re going to be a few years down the road. Maybe you’ll be backpacking across Asia by then, or living in a city where you don’t need a car. But if you can count on staying put for at least the next two years, leasing could be a very convenient option. You get to drive a nice new car for the duration of the lease — indeed, a nicer one than you could afford if you were buying a car.
There are down sides to leasing, however. You must stay within the annual mileage limit, and leases are notoriously difficult (expensive) to get out of, if the need to arrises. For the average college grad, we’d recommend a used car over leasing new.
Check It Out
If you’re buying used, a pre-purchase inspection should be an absolute top priority. It’s easy, too. All you have to do is find a reputable dealership or independent garage that specializes in the brand, and ask a mechanic to give the car a thorough once-over. These inspections typically don’t cost more than $100, and they could save you a bundle. If some notable problems are uncovered, you have more negotiating leverage with the seller — and if there are a lot of problems, you can walk away from that car and know that you just saved your future self a lot of time, money and headaches.
If you are buying locally and don’t have a trusted mechanic, type Car Inspection Companies into your browser. Up will pop local companies and mechanics specializing in pre-purchase inspections; many will actually travel to the vehicle’s location. If you are buying out of state, there are nationwide inspection companies that will inspect a vehicle anywhere. Additionally, we urge college grads, or any shoppers for that matter, to obtain a car history report before buying. Experian AutoCheck and CARFAX are two sources specializing in such reports.
If you’re going to buy a used car, keep in mind that cars are generally quite reliable these days. It’s not like the old days, when supposedly only a Honda or a Toyota would do. But the market is still stuck on those legendary Japanese names, which means their used prices can be inflated.This indicates you can probably find bargains on rival models. For specific models, you can check out reliability histories at Consumer Reports.
MPG Isn’t Everything
It’s easy to be seduced by claims like "best miles per gallon in class!" What those ads don’t tell you is best by how much — or which mpg rating they’re talking about. The reality is, the market’s so competitive right now that there’s usually a cluster of high-MPG at the head of each vehicle class.
First of all, you’ll want to look at the combined number from the Environmental Protection Agency (EPA) for a real-world projection. Their mileage data guides go back to 1995. And if the car you want is off the pace by a mile or three, well, do the math and figure out how much extra you’d be paying per year. If it comes out to something like a couple hundred bucks, you can weigh that sum against all the things you really like about the car. Also, your driving habits will have a lot to do with the mileage you get, no matter which car you drive. There’s more to MPG than meets the eye.
Buying a car is a huge step for anyone. The payments will be a major slice of your monthly income pie. But, you won’t be stuck with that first car forever. Knowing that, be realistic about what you can afford, targeting a vehicle that is safe and reliable, be it new or used.