(BPT) – If you’re in the market for a used vehicle, the car-buying process can be both an exciting and daunting experience. Whether you are a first-time buyer or looking for a different model, a car is one of the largest purchases you will ever make. It’s not only important to make sure you have the right car for your lifestyle, but one that makes the most sense for your personal financial situation.
If you are one of the millions of Americans looking to buy, here are some tips to consider.
Similar to buying a house, it’s important to know what you can afford before you start hunting for your dream car. If you will be financing a vehicle, getting pre-approved for a car loan may save you a lot of heartburn during your car search.
Interest rates continue to be at historic lows, but it’s important to check in on what rates you may qualify for and how it will affect the price of what you can afford.
‘It’s easy to get caught up in the excitement of looking for a new car and forget about the affordability piece,’ says Renee Horne, vice president of Consumer Lending at USAA. ‘Before you even begin your search, give your lender a call to see what you can actually qualify for and what will fit in your budget.’
A good tip to keep in mind is to not let your car payment exceed more than 15 percent of your monthly net income. While you don’t have to stick to it, this rule will help give you a rough estimate of what you may be spending each month.
Know what you can afford
Knowing what you can afford reaches beyond your car loan payment. Although used cars are typically less expensive, they may have more maintenance and ownership costs.
‘It’s important to look at the total cost of ownership,’ says Heather Pollard, vice president of Auto Experience at USAA. ‘Everyday expenses such as gas, insurance, taxes, maintenance and future repairs are all associated with owning a vehicle.’
Knowing a rough estimate of these expenses will help you stay on budget in the long run. Simple online loan calculators, like this one at USAA, can help give you an idea of how much you can afford.
Narrow your choices
With countless choices available, finding the right car for you can be a challenge. Your budget should help narrow some of your choices, but consider your lifestyle as well.
Do you have young children or plan to start a family soon? Then you might want to consider the highest IIHS safety ratings. Do you frequently travel for work? In that case, improved gas mileage and reduced emissions are important factors. Remember, all those extra upgrades come with a higher insurance price tag and are depreciating assets once you drive off the lot.
Although you may be more inclined to go after a new car with the latest cutting-edge technology, a pre-owned vehicle may be the better alternative for your lifestyle and budget. Better still, used car prices are the lowest they have been in years. Even if you opt for a slightly older version of the model you’re interested in, many used models still offer similar advanced features while saving you thousands of dollars in the end.
Need help finding the right car for you? The USAA Car Buying Service can help.