7 Indicators It May Be the Right Time To Purchase a Car
If you’re eager to buy a car, take a moment to ask yourself whether you have done the necessary financial planning and if now’s the right time to make the purchase. According to Kelley Blue Book, the average cost of a new vehicle is around $48,000 and rising. Even used cars hover at around $26,000 on average.
Of course, you could be using financing to make the purchase. While this can ease some of the financial strain on your budget, you’re still going to have to pay for the vehicle one way or another — potentially with interest charges.
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None of this means that you shouldn’t buy a car, however. Just make sure you have a clear idea of how much you’re going to spend and how the purchase fits into your budget.
With that in mind, below are the top signs that now’s the right time to buy a car.
Also, here are the best days for big sales at dealerships.
You’re Not Happy With the Cost of Your Current Car
If you already have a vehicle, start by assessing how much you’re currently spending and whether you’re happy with that amount.
“High gas, high maintenance and high insurance are all adjustable,” said Tim Pohanka, an automobile dealer at Pohanka Nissan Of Fredericksburg. “Does it make sense to keep paying on a car you really don’t want versus a bit more for one you do?”
If the answer’s no, but you have the budget for something different, now might be a good time to purchase a vehicle.
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Your Current Vehicle Has a Lot of Problems
“If your car has a serious malfunction more than three times a year or you’re experiencing some issue every month or so, it’s time to upgrade,” said Bethany Hickey, automotive and financial expert at Finder.
“Costly repairs every few months means you’re constantly sinking money into a depreciating asset,” Hickey said. “On that same note, if the cost to repair your car far exceeds the vehicle’s actual value, that’s a clear sign to go car shopping.”
You’re Financially Stable
Making sure you’re financially stable is key before making any big purchase, even if you’re using a loan to do it. If you have a stable job and income, then now might be a good time to make a big purchase like a car.
“Ensure you have a stable job and consistent income,” said Tariro Goronga, CEO of DriveSafe Driving Schools. “A steady flow of income reassures that you can handle monthly payments alongside your other expenses.”
It’s not just about your income, though. It’s also about making sure you have an emergency fund and some savings. That way, you’re prepared in case something happens and you need the extra cash.
“Before purchasing a car, it’s wise to have an emergency fund in place,” Goronga said. “This should cover three to six months of living expenses, including potential car payments and maintenance costs.”
Your Current Vehicle No Longer Meets Your Needs
Life happens. The car you currently have — if you have one — might have been perfect at the time, but it might no longer work with what you need.
“If your lifestyle has changed — maybe due to a growing family or a new job — a car upgrade might be necessary to suit your new needs,” said Geoff Cudd, consumer advocate and owner of FindTheBestCarPrice.com.
Along these same lines, it might be worth getting a car if you travel a lot and plan to use it on a regular basis. As long as you get something with good gas mileage and reasonably low maintenance and monthly costs, buying a car could be very cost-effective.
You Have Minimal Debt
This is especially important if you plan to use an auto loan to finance your purchase. If you don’t have any other debts or if the debts you do have are manageable, now might be a good time to get a car.
Your Credit Score is Good
If you plan to get an auto loan, it’s best to only do so once you have good credit or better.
“Before committing, it’s wise to check your credit scores, as they significantly affect loan rates,” Cudd said.
If your credit score is already where it needs to be to get the best rates and terms, then now could be an ideal time to get a car.
It Works With Your Other Goals
“Considering future financial goals is vital to ensure that a car purchase doesn’t derail other important financial plans,” Cudd said.
If you don’t have any other major financial goals on the horizon, you might be in the clear to get a car now. On the other hand, if you’re saving up for something big — like a down payment on a house — you may want to hold off on the car for now.
Calculating Your Budget for a Car
There are many ways to determine whether your dream car is within your budget or not.
“Start by evaluating the total cost of ownership, not just the monthly payment,” Cudd said. “This includes insurance, maintenance, fuel and possible loan interest. A general guideline is that your car payment should not exceed 15% of your monthly net income and total automotive expenses should be under 20%.”
You can use an online calculator to help you figure out your actual budget, as well as the potential costs of your car over time.
Another option is to follow the 20/4/10 rule, which goes as follows:
Save up 20% of the total sticker price as a down payment
Get a loan for no more than 4 years
Ensure your car payment stays at or under 10% of your gross (pre-tax) income
Keep in mind that many common car-related expenses will vary based on where you live, the type of car you get and your driving history. For example, car insurance rates tend to be higher on more expensive cars or for drivers with a history of accidents. You’ll also pay more for maintenance and repairs on older or specialty models.
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