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Thinking about buying a car? Here’s what experts say you need to know


Longo Toyota El Monte CA, shows customer the 2022 Toyota Prius.

Medianews Group | Orange County Register via Getty Images

It is not uncommon for people to spend significant money on their vehicles and trucks. About 16% of Americans’ total budget is spent on transportation costs, which includes fuel and vehicle costs. It is the largest expense of all. second-biggest expenditureAfter housing, but before other expenses like food, education and savings for retirement.

The scale of the expense can make shopping for a vehicle stressful – especially for younger, first-time buyers who tend to have less-established credit histories and lower savings.

It’s worse today because of the market.

According to Kelley Blue Book, the average cost of a new vehicle (including cars, crossovers, vans, pickup trucks and SUVs) exceeded $47,000 at the end of 2021 – up more than 25% in just two years. The average price of a used vehicle rose 42%, from less than $20,000 at 2019 to more than $28,000 two years later. The price rises are greater than overall inflation in the same period. The pandemic caused a slowdown in production and pent-up consumer demands.

What’s the best method to purchase a vehicle for your first time in today’s market?

The best place to start your car-buying adventure

The first thing a buyer should do is determine what type of vehicle they want and how much money they can afford.

You need to think carefully about your selection. For a couple or a single person, a small sports car may be a good choice. But not for someone who is planning to start a family. While a large SUV is great for road trips and camping with friends, it’s not likely to make for much enjoyment when it comes to filling up, paying for insurance or finding street parking.

Ronald Montoya is the Edmunds senior consumer advisor editor and content strategist. He said, “Think about what your needs are, how far you commute, how heavy you need to transport, and whether you enjoy driving.” “Avoid overbuying – you can probably get by with a smaller vehicle for most of your needs, and just rent something bigger once or twice a year, when you really need it.”

Selecting the vehicle you want to purchase

These days, nearly half of auto shoppers choose crossovers – tall vehicles based on passenger cars that have an open back area (like a station wagon or SUV) rather than an enclosed trunk. Crossovers have the most efficient and driving characteristics of traditional cars, but also some of the rough-and-tumble capabilities of four-wheel-drive SUVs.

A traditional car is a good choice if you do not need to be in a high driving position or aren’t likely to travel in deep snow. Cars come in a variety of forms, including sedans, coupes, convertibles and station wagons. They are lighter than crossovers and tend to have a lower center-of-gravity, which helps with efficiency and handling.

If someone regularly travels, tows, or tows vehicles on poor-kept roads, they might prefer a classic SUV or pickup. They are typically built on large-duty truck frames that can take abuse. While most SUVs or pickups use a lot more gas than they need, some options are still viable, like the hybrid. the new Ford MaverickThe Ram 1500, Chevrolet Tahoe and the Chevrolet Tahoe are available in diesel and petrol versions. A range of electric options are available, including the Ford F-150 LightningIn the coming year, more pickups are expected to enter the marketplace.

Minivans are still available for anyone who does not tow or go off-road, but does need to transport a lot of people and stuff. These minivans can be used to transport large families. They come in both front- or all-wheel drive options and are comfortable enough for up to 8 people.

Anyone who is considering purchasing an electric vehicle should plan ahead. Battery powered transportation may represent the future, but the vast majority of vehicles sold still use gasoline – electric vehicles accounted for only 3.4% of total vehicle salesThe fourth quarter of 2021 saw a decrease in diesel sales (4.6%). Most pickups were affected. The remaining 7.5% came from hybrid vehicles that combine electric and gasoline power. Although manufacturers have been working hard to boost battery production, some electric vehicle sales may still qualify. federal tax credits of $7,500On top of local and state subsidies

If a buyer has an idea of the type of vehicle they want, they can read reviews from professionals (e.g. Car and Driver. Jalopnik. Edmunds. Search owners’ reviews. Then arrange test drives.

Are you looking for something new or an old item?

For many years, the fiscally smart move was to buy a low-mileage used vehicle – something two or three years old and in good condition. Although they might not come with the latest informationtainment equipment, a full warranty from the manufacturer, these vehicles still provide reliable transportation. The vehicle would usually depreciate by 20% the first year. It will then decline 10% each year for the few years thereafter.

The Covid pandemic is reducing depreciation but prices for used cars continue to rise faster than new. Because the gap in price is narrowing, it becomes easier to purchase new cars. They are also more reliable and come with a warranty.

Due to rising gas prices, Teslas that are used have been doing particularly well. more interest in EVs and the economics of rechargingFilling up versus driving. These all-electric cars, now selling at $65,000, are close to what they were when new.

Consumers should look around as it is cheaper to buy used than new.

A certified pre-owned vehicle is something that most manufacturers will offer to used buyers through their authorized dealers. CPO vehicles – generally low-mileage and of recent vintage – are thoroughly cleaned and inspected, then repaired if necessary. These vehicles offer an additional warranty that is manufacturer-backed. Others include extra benefits like trip insurance or roadside assistance. Although CPO cars are more expensive than regular used cars, they offer peace of mind.

How do you pay for an auto

Buying a vehicle outright – often called paying cash for the car, even though it’s more likely to involve a cashier’s check or credit card rather than a literal wad of cash – lets consumers avoid monthly payments and thousands in interest. It’s not an option for all. A lot of people don’t have enough money. Dealers make more off financing so they are less inclined to bargain on the price.

According to Greg McBride (chief financial analyst,, “Paying cash in cash is often your best choice because it limits the amount you can pour into depreciating assets.” But don’t drain your emergency funds just to purchase the car.

Leasing or loans are an option for shoppers who don’t want to pay cash.

With leasing, consumers generally make lower monthly payments, but don’t own the vehicle at the end of the term – typically three years – unless they pony up a big lump-sum payment. McBride stated that leasing is often an endless cycle of payments. McBride said that leasing is essentially like renting a vehicle. At the end of your lease, you must return the vehicle to start over with a brand new one.

Leasees can get into trouble for making modifications to the vehicle, such as engine or sound upgrades. The leasee must pay a fine for excessive wear and tear or terminating their lease before the end of their term. They can also be penalized for exceedingly frequent driving (usually 12,000 miles each year), but there are newer leases that allow them to drive up to 10,000.

Lease providers are also reducing mileage allowances and reducing incentives such as cash rebates or sub-prime interest rates. If you are unable to pay cash, the majority of people looking for a car should consider loans. Loans usually end up costing less than leases – especially for consumers who hold onto vehicles for years. Loans don’t require you to pay extra for mileage, wear or a penalty if the loan is terminated early. The best part is that the loan ends and the car becomes the owner. The loan term can be as long as 84 months or more. Experts recommend that you stick to short-term loans at lower interest rates to reduce overall cost.

For consumers who have owned vehicles for many years, loans are often less expensive than leasing. Consumers don’t have to be concerned about wear or mileage and they can terminate their loan at any time. Montoya said that most customers recommend getting loans. She suggested that at least 20% be put down to maintain affordable monthly payments and to eliminate GAP insurance.

GAP, which stands for Guaranteed Asset Protection, protects those who have a lease or loan on a vehicle and owe more. It pays for the difference in value between what they owe and what is owed if their car is stolen or damaged. 

McParland stated that everyone financing needs to understand their credit score in order to determine where they are. Then, cross-shop with lenders and leasing providers. McParland stated that preapproval for loans is advisable before speaking to dealers. This gives you some leverage so they can find you the best rate.

Which dealer or directly to purchase?

The majority of used and new car sales still take place through dealers. A dealer allows you to view multiple cars and allow you to test them out. They also offer financing options and other useful services, such as oil changes and tire rotations. In many cases, a dealer will also accept a buyer’s old car on trade in – with used vehicle prices so high, that can be a big help.

Dealers can be aggressive in their sales techniques and have a tendency to add extra services at high prices. It is possible to etch a VIN (vehicle identification number) on the windshield. This can help deter theft, and can lower your insurance rate. But dealers may charge you more than $300. A $25 kit can allow consumers to do this work themselves. Montoya stated that it is a good idea to inquire about dealer-installed options and markups in order not to pay excessive fees. Although it’s a seller market, dealers will not always waive the cost of any additional fees, buyers can still take their business to another place.

A no-haggle dealer is another option, such as CarMax and Vroom. Although these companies may be more expensive than traditional dealers, they are generally well-received by consumers. They promise stress-free shopping, a guaranteed price and money-back guarantees. In most cases, each will deliver a brand new vehicle right to your doorstep. CarMax offers locations in person where customers can view cars, which is different from the other companies.

You don’t necessarily have to deal directly with dealers. Buying from a private seller is usually cheaper – there’s less overhead to deal with and little chance for any inflated add-on costs. Privately buying can make it easier for those who are comfortable handling paperwork and arranging financing.

How to Buy a Car