Purchasing a car is likely one of the most important investments you’ll make in your lifetime, second only to buying a house. And while the car buying process is stressful enough as it is, navigating the vehicle market becomes more complicated when working with a student budget.
But don’t fret! Below, we’ve compiled 7 of the most important things you should consider when upgrading your car on a student budget. These guidelines are the key to securing your perfect vehicle while avoiding falling into the dreaded student debt trap!
Identify Your Car Needs
The car market is incredibly diverse, with hundreds of models decked with every cool feature you can think of. But just because a car is in tip-top condition with the latest high-tech features doesn’t mean it is the right car for you.
Identifying your specific car needs is the first and most crucial step when purchasing a car on a student budget. For example, will you use this car to commute to college daily? How far is your college/workplace from your home? What sort of roads do you usually drive on? Are there any specific safety features that are important to you?
Knowing what you need before hitting up the market can help you narrow down your list of requirements and make the car buying process much more straightforward.
Conduct Market Research
Once you’ve understood your requirements, the next step is to conduct market research.
Focus your research on finding the best deals. Read reviews, research models, brands, and makes, and consider various financing options before putting the money down. If you put in the work at this stage, you’ll know exactly how much and what you should spend your money on, so you aren’t met with any rude shocks down the line.
This is also a good time to revisit your requirements and see whether you’re likely to find the type of vehicle you need with the budget you’re working with. Browsing through multiple options can help you figure out your wants vs. needs. Once you have an estimate of the general market price of your required vehicle, you’ll also be in a better position to negotiate with your dealer.
Estimate The Total Cost Of Ownership
A common mistake students make when budgeting for a new car is considering only the vehicle’s initial price.
While that cost is important, you should look at the price of your car on a broader scale. It’s essential to estimate the total amount your vehicle will cost you over its life, as this can help you make the right purchase.
While an older, used car can be a cheaper option at first glance, it will likely cost you more in maintenance and fuel in the long run. Fuel efficiency, maintenance costs, and insurance are therefore necessary considerations to make when purchasing a car on a student budget.
Look Into Pre-Owned Options
This is the best option for those looking to make the most of a limited budget. Although used cars can represent a landmine of potential repairs, with the right research and mechanical appraisal, you might be able to snag a vehicle that’s only 2 years old and half the cost. So if a flashy new vehicle is stretching your budget a bit too much, try looking into pre-owned cars.
More importantly, looking into pre-owned marketplaces can be a great one-stop shop solution for you to both sell your existing car and be on the lookout for a new one. When selling pre-owned vehicles, you’ll want to ensure that you minimise any excess fees and when you purchase through an online auction or selling platform, you need to make sure both the authenticity and volume of car listings are to a high standard. Click here to list your vehicle to over 3 million bidders and to compare prices for any models that pique your interest.
Cars tend to lose their value quickly, and you will likely find reliable second-hand models in great shape that are well within your budget. Make sure to purchase only a certified pre-owned vehicle that ideally has low mileage.
Understand Financing Terms
Before jumping headfirst into the car purchasing process, you must have at least a basic understanding of some typical financing terms you’ll encounter. If you’re well-versed in car financing terminology, you can navigate the process better and avoid getting ripped off.
For example, you should understand how the down payment and interest rate will work. While it can be tempting to extend the time of the loan to make smaller monthly payments, this can cost you more money over time.
Generally, you’ll be able to get a better interest rate on a shorter loan term. You should never make a purchasing decision depending only on the monthly payment price of the vehicle.
Get A Pre-Purchase Inspection
A pre-purchase inspection (PPI) is one of the most important (and unfortunately overlooked) steps of the car buying process.
If you’ve got your heart set on a car, make sure to get a PPI before handing over the payment. This means hiring an independent mechanic to conduct a thorough car inspection to ensure it is in good shape.
This will cost you around $100- $150, but you can rest assured that this is money well spent. A pre-purchase inspection is especially crucial when buying a certified pre-owned car, as this can help identify hidden damages that would otherwise cost you a fortune in the long run.
Consider Paying In Cash
Once you’ve set your eyes on the perfect vehicle, it’s time to make the payment. While most people don’t pay much attention to this option, making your payment in cash can prove more affordable.
This is because even if you can secure the most favorable loan terms, you will end up paying thousands of dollars in interest, which you can save by making a bulk payment in cash.
Not only does this save your money and eliminate the need for monthly payments, but it also helps keep your budget in check. Paying in cash can also help you realize how much you can actually afford and whether you’re making the right purchasing decision.
So remember, while you will miss out on a credit boost, paying in cash is a good option if you can afford to pay the lump-sum amount in one go.