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How to choose the right car for your needs

How to choose the right car for your needs

How to choose the right car for your needs? Simple – maximize the buying power of your money, know exactly what you need, and stay flexible enough so that you maximize your chances of getting a great deal. The more you limit your options, the fewer bargains you’ll come across. And the more careless you are with your money, the worse the car that you’ll be able to buy.

If you want to learn how to decide on a car purchase, follow our 6-step process detailed below. By the end, you’ll get a car that you can depend on and that ticks every one of your “must-have” boxes, all while sticking to your original budget.

How much car can you afford?

The first step to picking the perfect car is to calculate just how much car you can comfortably afford. The consensus is that you should aim to spend no more than 15% of your monthly take-at-home pay on your car loan or lease. To that, you can add another 5 to 7% in monthly car expenses such as gas and insurance. 

That is a simple and quick way to determine a ballpark figure of how much you should be spending on your future car. Unfortunately, it’s not very accurate. There are lots of hidden costs associated with owning a car, all highly influenced by the sort of vehicle that you end up buying.

The true cost of owning a car goes well beyond your loan repayments, gas costs, and insurance. It also includes the car’s depreciation, maintenance and repair costs, plus taxes. And out of all of them, likely the biggest cost is the car’s depreciation. 

On average, every car loses between 15 to 20% of its value in the first year of its life. Then you can expect another 10% drop in value with every passing year. And even though all cars are depreciating assets, some have steeper depreciation curves than others. Vehicle depreciation is influenced by many factors that range from the obvious to the surprising. It’s obvious that the more accidents a car is involved in, the less it will be worth in the future, but maybe not so obvious that a yellow car will lose more of its value over time than a grey, comparable car. Find out everything you need to know about a car’s depreciation curve from our blog.

The vehicle you choose and the way you treat it will dictate its resale or trade-in value. Both those variables will also influence ongoing costs such as insurance and fuel consumption. Knowing where to compromise just a little can save you tons of money as similarly priced cars come with wildly different costs of ownership. The “right” car is first and foremost one that doesn’t put too much strain on your financial stability.

What type of car are you looking for?

If you want to know how to choose the right car for your needs, you must figure out… your needs. Simple right? But you’d be surprised just how many people skip logic and end up getting swept away by their emotions.

The more in-depth you’re aware of your specific needs, the better the chances you’ll have at picking the perfect car. So now, from the obvious to the often overlooked, here are some questions you need to ask yourself to determine what’s the right car for your needs:

  1. What’s your primary reason for buying a car? Is it to show off, is it to drive your entire family around, is it to help you with your work?
  2. Is this a daily driver or a week-end cruiser?
  3. How many passengers are you likely to transport?
  4. Will you need to haul anything, like a trailer?
  5. Do you want the basic safety features or are more advanced and modern features a priority?
  6. What sort of entertainment technology are you expecting to find in your future car? Apple CarPlay? Android Auto? Both?
  7. How many miles are you likely to drive the car every month?

Answering the first four questions will help you select the type of vehicle that you’re after – a sedan, SUV, truck, coupe, or convertible. The seventh question is a good start for choosing between a hybrid, electric vehicles, or those powered by gasoline or diesel. The middle questions, five and six, will help you narrow down your options between similar models. A Ford equipped with automatic brakes and lane-keep assist might appeal more to you than a Chevy with a huge infotainment display but basic safety tech.

If you know your exact needs beforehand, most choices will become obvious. Answering a handful of questions, as intuitive as they might seem, saves you a lot of time and a lot of trouble in the future.

Some sets of needs fit multiple types of cars, so here is a brief explanation of what you should expect from the most popular ones:

Sedans – nimble and usually more fuel-efficient, sedans are great for city dwellers and even commuters. They offer less space than an SUV or a crossover but feel good to drive and have a lower average total cost of ownership.

Crossovers – if sedans and SUVs had a baby. The most popular car class in the United States thanks to its versatility, crossovers offer interior roominess and comfort similar to that of SUVs and a driving experience that’s close to a sedan. Crossovers range from petite to large, so they cover many needs.

SUVs – the undisputed king of comfort, the SUV makes for a plush ride often at the expense of fuel economy and maneuverability. 

Pick-up trucks – modern trucks have come a long way from those of 20-30 years ago. They still get the job done but they can now also offer the comfort of a luxury SUV. Great for tradesmen or urban cowboys, they come with almost unlimited power and quite a big appetite for fuel.

Once you know what you want, the next step is to look at cars that fit the bill. A great tip here would be to always keep your options open and consider more than one model in the class that you’re interested in. Most drivers have a car model they prefer, but it’s a winning strategy to also have a plan B and C. For one, the more models you’re open to buying, the bigger your chances are of finding a great deal. 

Finally, once you have your top three models in mind, go ahead and check a few reviews from previous owners. It’s remarkable how much information you can find online – you can literally see into the future by reading what other drivers are saying about the cars that you’re interested in.

Decide between new and used cars

One of the biggest early-on decisions you’ll face when looking to buy a car is deciding between buying a brand-new or a used vehicle. Both come with their own unique sets of pros and cons.

New car pros

  • The latest technology and features
  • Manufacturer Warranty
  • Likely better financing terms
  • Customizable to your liking
  • No history to stress over

New car cons

  • More expensive
  • Huge instant depreciation
  • Higher total cost of ownership
  • Waiting period for customization
  • Brand-new tech can be faulty

Used car pros

  • You avoid the steep 1st year depreciation
  • Cheaper to buy
  • Lower total cost of ownership
  • Available on the spot
  • Lots of online reviews from other owners

Used car cons

  • More wear and tear
  • Older technology
  • Unknown history
  • No factory customization is available

Of course, many of the pros we listed above for used cars depend on your ability to choose a good, reliable second-hand vehicle. If you were to purchase a used car that’s had its odometer rolled back, for example, or one that’s been in numerous accidents that you don’t know about, you’ll likely regret your purchase. And for this conundrum, there are a few solutions.

The most obvious solution is to go for a Certified Pre-Owned vehicle, one with factory-, not dealership-backed certification. A manufacturer-backed CPO car is a used vehicle that comes with lots of extra safety nets that make it almost impossible for you to get a bad deal.

CPO candidates first have to meet age and mileage requirements to qualify. Although these restrictions differ from one brand to the next, they tend to follow the same idea – A Certified Pre-Owned car needs to be relatively new (no more than 5 to 6 years in most cases) and to have little wear and tear (less than 50-60,000 miles registered, on average). This alone makes CPOs better choices since it will help you get a newer car that will require less maintenance. CPOs also come with an extended warranty and they go through an inspection and reconditioning process. The downside is that they cost a bit more than regular used cars.

If you want to buy a regular used car, then you need to obtain a vehicle history report from a reputable service provider such as carVertical or Carfax. And you should take it in to get inspected by a professional mechanic.

Car financing options – buying or leasing

Another important aspect of how to choose the right car for your needs is deciding whether you’ll purchase or lease it.

With leasing, you’ll either pay less to drive the same car or you’ll drive a better car for the same monthly payments. On top of that leasing requires little to no downpayment up front. The downside? You don’t actually own the car that you’re driving, you’re just renting it. You also don’t build any equity and the second you stop paying your monthly installments, you’ll lose the car – most leasing agencies are very quick to impound your car if you miss just one payment.

If you purchase a car, however, you either pay for it out of your own money or you take out a car loan. In both cases, after you finish paying off the car, it will be yours to drive forever until it breaks. You’ll also be able to trade it in as a downpayment on a newer car.

Leasing

Pros

  • No or low upfront costs
  • A new car every three years
  • Lower monthly payments or better car

Cons

  • You don’t own the car at the end of the lease
  • You don’t build any equity
  • You have to pay forever if you want access to a car
  • Limitations on miles

Buying

Cons

  • Downpayment required
  • Higher monthly payments

Pros

  • You own the car once you pay off your loan
  • Lower cost of ownership, if you keep the car for 5+ years
  • No mileage restrictions, so drive as much as you want at no extra charge

Leasing gives you access to better cars and it allows you to change your ride every three years with a brand-new model, while buying a car gives you more freedom of use and a stronger financial position once you pay off your loan. Keep these differences in mind when you ask yourself “What’s the best car for me”? 

Looking for a car

In the 21st century, this really isn’t something that you should be worried about – looking for a car is one of the easiest car-buying steps, thanks to the internet. But, even though there are scores of sellers you’ll have access to, there are a few things you can do to improve your odds of finding a great deal.

The first one is to give yourself as many options as possible. And you do that by considering online dealers, private sellers, and dealerships plus by expanding your search area to other towns and even other states. The wider the net you cast, the bigger the likelihood of finding a hidden gem.

The second most important factor is time – the more you have, the better. If you can wait, then don’t rush into buying straight away because something better is always around the corner. And if you can time your car purchase, make sure to aim for months when it’s more likely that you’ll get a good deal (a convertible is bound to cost less in December than it is in July).

How to test a second-hand car

A vital step to picking the perfect car is to stay out of trouble. With new cars or CPOs, the only trouble you can get yourself into is buying a car well above your financial means, or getting a bad deal on your car loan terms (an easy fix if you get preapproved for a car loan).

For used cars that aren’t backed by any certification, you need to follow these three steps to guard yourself against bad deals:

  • Obtain a vehicle history report to see if there are any red flags in the car’s past (rolled back odometer, theft records, bad titles, hidden accidents).
  • Go for an in-person inspection and take the car for a test drive see how the car feels and sounds while you drive at high speed on the highway and in stop-and-go traffic.
  • Arrange for the car to be inspected thoroughly by a professional mechanic – a professional inspection can save you from buying a nice-looking car that’s actually a total wreck.

To sum up, these are the steps to picking the perfect car:

  1. Figure out how much you can comfortably spend (in total and on a monthly basis) – be mindful of the Total Cost of Owning a car
  2. Make a clear list of your needs so you can eliminate cars that don’t fit the bill more rapidly and get more time to focus on inspecting the right cars and negotiating better prices
  3. Decide between buying a New Vs a Used car
  4. Will you be Buying or Leasing
  5. Cast a wide net to increase the chances of finding a great deal – pick at least three models that match your needs, and consider looking out-of-state
  6. Test the car thoroughly – get a vehicle history report, take the car to a professional mechanic, and go for a test drive

If you’re diligent and you invest a little time in the search process, you’ll know how to choose the right car for your needs ten times out of ten. But if you decide to wing it or skip any of the steps listed above, then you’ll be basing your choice on luck and you’ll place yourself at the mercy of car sellers. Not necessarily a situation you want to find yourself in.

FAQ

How to know the car’s fair market value?

Easy, do some online research. Check out car classified ads for similar models and account for a 5% negotiation margin. Another helping tool is a vehicle history report – if there is sufficient data, carVertical’s history report also includes estimates of what the car is worth.

What is the biggest mistake when car shopping?

It’s difficult to name just one. You can pick between not checking the car’s history, not getting preapproved before searching for a car, not having a solid idea of what your core needs are, not taking the car to get inspected by a mechanic before you buy it, or not knowing the current prices of similar models on the market.

How to save money when buying a car?

When buying a car, you can save money in many ways – first get pre-approved for a car loan before starting to look for a car, then consider the total cost of ownership not just the monthly payments, make sure you know the market well (especially the prices of similar models that are for sale), and buy a vehicle history check and take the car to be inspected by a mechanic (both before actually buying the car).

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