Buying a car is an exciting, yet stressful event. Everyone wants the freedom that comes with their first car. I remember I couldn’t wait to get myself behind the wheel. However, the cost of a car that isn’t a bucket can be costly. I know personally that I didn’t have 10,000+ dollars saved up to buy a car as a student. Purchasing a car recently, I wanted to create a quick guide for buying a car as a student.
What is the Purpose of Your Car?
So first things first, what do you need your car to do for you? For 99% of us, the answer of that question is to get you from A to B. Keeping that in mind, buying the awesome looking Corvette might not be the best option. When looking for a car, you do need to consider some additional needs. Features like trunk space for moving, all wheel drive for snowy conditions, and safety features just to keep you safe. All of these should be factored into your purchase.
Your Car is an Investment
The next thing to remember when buying a car as a student is that a car is an investment. A car’s value deteriorates over time. How much it deteriorates and how much use you get out of it is what you’re investing into. Additionally, cars require maintenance, which can add a good amount of cost.
Options when Buying a Car as a Student
So there’s a few options when buying a car as a student that I’ll cover today. Keeping in mind the purpose of the car and that it is an investment, the important thing is to always stick within your budget.
Buying a New Car as a Student
The first option is to buy a car new. This will require a good amount of savings, financing, or financial help from someone else, but there are a lot of pros to this.
Pros: Under Warranty, Little/No Maintenance, High Quality
Cons: High Cost, High Investment Deterioration Rate
Buying a Used Car as a Student
Another option is to buy a new car. When buying a used car, there’s some additional factors to consider. First off, you need to know the quality of the car/value of it. Never purchase a car that you can’t see the owner history. The best way to buy a used car is through someone you know. If you personally know anybody that is selling a car for a good value, that is your best option. The reason for this is that you will have all the details of the car history. You’ll know how well they took care of the car and what you’re getting yourself into. Dealerships are another place to look, but they are often a bit more pricey and you run the risk of not knowing all of the vehicle’s history.
Pros: Lower Cost, Low Investment Deterioration
Cons: Quality (sometimes), Maintenance (sometimes)
Leasing a Car as a Student
The last option is that you could lease a car. A lot of you might not know what leasing a car is, so I’ll provide a brief explanation. Essentially, leasing a car is paying to borrow a car with a set amount of miles you can use for that cost. The borrowing time is usually over several years, typically 3. You don’t have to worry about maintenance at all since it’s the dealership’s car and they will be taking care of it.
Pros: High Quality, No Maintenance, Low Short Term Cost
Cons: Not Owned, Not an Investment, Cost
GraduAgent’s Recommendation for Buying a Car as a Student
So now that we’ve seen the options and know what to keep in mind, what’s the best choice? Well there’s not really a set answer for that in my opinion. For some people, the convenience of having a new car that they own is the best option. They get the best quality and will be able to drive as much as they want with very little maintenance. For other people, leasing is a good option. They will have a top quality car and the payments are spread out over the term of their lease with a good rate because they don’t drive very often. And there’s cases where buying a used car is the best option. It allows someone to own a car at the most discounted price and accomplish their goal of going A to B.
Regardless of which choice is best for you, I’m going to give my input from a financial value standpoint. The first rule I’m going to tell you is this: Do NOT buy a car that you can’t afford to own. While financing a car through a lease or over the standard 5 year payment plan might be doable, it is in no way the best option financially. When financing anything, there’s interest being added onto payments. Why would you want to pay more on something than you need to? Purchasing a car upfront avoids car payments that would decrease from your net income each month and prevents you from spending those additional dollars on interest that could be used elsewhere.
Here’s a quick comparison of how much money is spent on a car bought upfront, leased, and financed:
As you can see buying the exact same car from dollar standpoint goes to the upfront purchase. There is no interest on the payment and the lack of a monthly payment increases your net income. Now the next thing to keep in mind is the investment aspect of purchasing a car. Buying a car upfront is the best dollar value, but is buying new the best value for your dollar? Once again this depends. For someone that NEEDS to have a brand new car, then yes. Stop reading now and know the best deal is to buy. However, if you want the best value, purchasing a used car is the best investment. Here is a quick breakdown:
Now from a dollar standpoint, a used car costs less money per year than a new car. Additionally it requires a significantly less amount of initial money. For a student, this is much more realistic and the best dollar value. However, there are risks that come with a used car such as repairs. Keeping these in mind, buying a car as a student is about compromising between quality and value. By no means am I saying to drive around the Flinstone Mobile with holes in the car. However, from a value standpoint, purchasing a used car is a much better investment than getting that new sports car.
Here are some quick tips when looking for a used car:
Check Private Lenders First – Elderly people usually take very good care of their cars and are willing to part with them for a good price.
Negotiate! Never be afraid to try and do better. State what you think the value of the car is and see if you can get a better deal
Inform Yourself. If you’re not super knowledgeable about cars, finding the right one might be confusing. Ask someone you know or read online about what to look for in a good car.
Buying a car as a student is about finding the best car for your price. Take your time with your purchase and do your homework. It’s an investment, so make sure you get your money’s worth!