Car Talk: What Should You Know Before Buying a Car?

Cadillac. Ferrari. Hummer.
Those glossy magazine inserts may be just too tempting to ignore.
The names leap off the pages, conjuring up visions of empty highways with you at the wheel, hair billowing, music playing…

Wait! Car buying is a major life purchase, and shouldn't be guided by emotional responses to marketing tactics.

Assess Needs Along With Wants

Sure, the shiny SUV looks powerful, but do you really need it to drive the kids two blocks to school? Is that sleek, sporty two-seater going to meet the needs of your family of four? If you examine your needs, rather than your wants, you will discover what kind of car is right for you. Here are a few things to consider:

• How many people are you transporting?
• What kind of driving do you do? How long is your commute?
• How important is good gas mileage to you?
• What safety features do you want?
• Will you be towing anything?
• Will this vehicle fit in your garage?

What Can You Afford Per Month?

Establish how much you can reasonably afford to pay per month. A rule of thumb is that monthly payments shouldn't exceed 20 percent of your monthly take-home pay¹.

Buy or Lease?

There are many advantages to both buying and leasing. A lease requires little or no money up front and offers lower monthly payments, but when the lease ends, you are left without a car. While it is more expensive initially to buy a car, once the loan is paid off the car is yours to drive, sell, or trade in.

Additional Costs

Before signing on the dotted line, do a little research to determine the long-term ownership costs associated with the particular make and model you are considering. Things to consider: depreciation, insurance, maintenance and fuel costs.

Trade-In, Sell, or Donate?

What should you do with the car you already own? You could sell it to the dealer you are doing business with for a trade-in. You won't have to sell your car and incur all of the expense and headaches that goes along with that process. Donating your car to charity for the tax write-off and the satisfaction of giving to an organization you care about is another option. The IRS can provide information on how to assess fair market value, and also on determining which charities are eligible for the tax benefits.