Dreams of driving a red convertible on a bright summer day are just that: dreams (at least in your twenties). While you may get lucky enough to find an adorable convertible in good shape and for the right price, chances are your first car is going to be much more modest. That’s not a bad thing, though — especially for your wallet and your financial future.
Choosing the Right Type of Car
You may have your heart set on a brand new SUV, but if you’re not going to be driving around a carload of people or gear, it will be too much car for you — and you’ll be paying way more than necessary. Before deciding what car you want, think about why you need a car:
- Who will you be driving? Just you, or your siblings, friends, or coworkers, too?
- Where will you be driving? Will you be staying mainly in your town or city, or will you be on the highway every day as you go back and forth to school or work?
- How much space will you need in your car? Will you need to fit suitcases in the trunk because you’re a frequent traveler?
- Are you into sports that require extra backseat space for your gear?
If you decide you do need something like an SUV, choose one with the same fuel efficiency as a car — otherwise, your gas expenses are going to go up. Also, don’t immediately go with the newest vehicle on the market — a slightly older one that’s used could get you more bang for your buck.
Buying a New Car vs. Used Car
When buying your first car, do your research before plunking down for a new vehicle. If you’re planning on buying a new car, know that the value of the car will depreciate quickly. Picture throwing $3,000 out the window as you drive away from the dealership. The value of a new car depreciates by up to that much the moment you drive off the lot.
By purchasing a used car that’s just a few years old, you’ll still get many of the features and functionality of a new car. Older models have also endured the tests of time, leaving you less likely to be subjected to safety recalls, as well as the safety risks involved. Your twenties is a time to be careful with your money; it’s not the time to throw it away.
Something else to consider: When buying a car, the cost on the sticker is never the final cost, whether you’re buying new or used.
You also have to pay for insurance and interest on the car loan. Both insurance and interest may be higher on a new car than a used car. Make and model are more important than calendar year when it comes to insurance. If you have your eye on a new car because you want something flashy, it’ll be pricier to insure than if you bought a more modest car.
Should You Lease a Car?
Leasing sounds like a great idea at first. You can drive practically any car you want for a few years, then turn it in once the lease is over and never worry about it again. Leasing has some unexpected costs, though:
- Since you’re essentially renting the car, you have nothing to show for it once the lease is up. You won’t own the car, and you won’t be able to sell it to get some of your money back.
- If you love the car and want to buy it once the lease is up, you’ll end up spending more overall than if you bought it from the start.
- Most leases have mileage limits. If you go over the limit, you’ll pay a fee for the extra mileage. If you’re unsure of how much you drive, a lease might be too risky.
As a new driver, you may be unsure of exactly what you need in a car. Until you know how much you drive and if you like the idea of not owning the car (i.e., not being ultimately responsible for it), don’t test out a lease for your first car.
Alternatives to Buying or Leasing a Car
If you’re not yet making enough to buy a car, or if you’d rather put your money into savings or a retirement account rather than pay for a car, there are some transportation alternatives to consider. Your options depend on where you live and how often you drive.
- If you live in a city, you may be able to get around better with public transportation.
- If you mainly drive to and from work during the week and you can get a ride with a coworker, you’ll only have to figure out how to get around on the weekends.
- Think about what’s within walking distance of where you live. Can you walk or bike to your regular places each day, like the coffee shop, bank, and grocery store?
If saving for a car is a larger priority than buying an inexpensive car that will cost too much in repairs, it may be worth it to figure out alternatives for the time being.
Purchasing a used car doesn’t mean you’ll be buying a lemon, and buying a new car doesn’t mean you’ll end up with a high-quality car. Your twenties are a fantastic time to start planning for your financial future. Deciding how and if to buy a car is a big consideration.
One thing’s for sure, though: Paying the added costs for a new car is typically not a savvy financial decision. You don’t have to lose out on quality or features simply by choosing a used car.
By Magnolia Potter
Magnolia Potter is a muggle from the Pacific Northwest who writes from time to time and covers a variety of topics. When Magnolia’s not writing, you can find her curled up with a good book. Find her on Twitter: @MuggleMagnolia