I purchased my first car in college. I needed something better on gas since I’d been commuting 100 miles round trip in a high-mileage vehicle (aka the family van) to earn income off campus.
Here’s where my decisions went awry.
The car I purchased is slightly sporty and had a price tag of 14k. There are a couple of things I did wrong, though:
The price tag for my car was not in my budget.
I paid too much for a used vehicle with 100k miles on it.
I paid for bumper-to-bumper insurance (what a waste).
I didn’t do enough research before going into dealerships.
My car payment was $245/month, but I could’ve achieved an even lower rate with my credit.
Bumper-to-bumper insurance is actually a warranty purchased from the car manufacturer and not a form of auto insurance.
Bumper-to-bumper coverage usually pays for mechanical or equipment breakdowns, defects or issues with certain car parts, and labor costs. — Wallethub
But here’s the thing, if I had to do it again, I would buy the same car. However, I wouldn’t have purchased bumper-to-bumper insurance, and I would’ve negotiated more.
With more experience comes more wisdom.
The more cars you buy or car purchases you attend (or learn about second-hand), the more intelligence you gain. Watching people buy cars over the years has made it to where I can officially no longer get gypped.
Back in the day, I used to feel anxiety, fear, and zero confidence whenever walking into a dealership. I know what I’m doing now.
Sometimes it takes real experience to walk confidently into a dealership, but I’ve also completed extensive research.
At the end of the day, I hold the power in my hands when I go into a dealership; it should never work the other way around.
Why get intimidated by someone selling me something?
Two things that have helped increase my confidence in car buying include:
Helping others negotiate their car purchases.
Improving my financial situation.
I paid off my car in 3 years instead of 6.
I knew I didn’t want this car payment looming over my head for six years, so I made extra payments when I could.
At the time, it was my only debt aside from student loans.
Outside motivation kicked in, though; I knew I had overpaid for my car, and I desired to erase my mistake by paying the car off early to eliminate paying even more for an overpriced car.
My final payment was to the car after receiving my first paycheck from my first corporate full-time job out of college. I was proud; I managed to pay off my car in half the pre-determined timeline and didn’t even hold a full-time job for 99% of the time I owned it.
Getting that sucker paid off after receiving my first full-time paycheck was a priority.
One of the best feelings in the world was getting the car title.
Donezo!
I got lucky. My first car is my current car.
Thankfully, my car has lasted through the years without much issue — sitting on over 200k mileage. I’m still driving it today. I am forever grateful. I plan to get a new car, but I’m in no rush. After some minor investments in cosmetics, it looks brand new on the outside, and I’m still free of any car debt.
On top of that, my car insurance is fricken cheap considering where I reside.
When buying a car, always ask yourself four questions:
How long will this car last?
Can I afford the mpg (miles per gallon)?
Always know what the miles per gallon on your car is and how big the tank is. Ensure you can afford to fill the gas tank regularly if you drive often. If not, skip it.
How much will I need to spend on recurring maintenance?
Do I have financial assets (i.e., this does not include a home) to cover this purchase?
Most people buy cars they can’t afford and don’t have the financial assets to over.
Does this car make sense for my current stage of life?
Maybe you have kids or several dogs like me. Does the two-door still make sense?
Maybe it does; maybe it doesn’t.
People forget to ask these questions when buying a car—especially the fourth one.
Here are a few things I will ensure before buying my next car:
Negotiate.
Maintain a positive net worth after the purchase.
Have a price and rate already in mind based on thorough research.
Be able to buy the car with cash — even if I decide to take out a car loan.
If I don’t pay all cash for the car, get a crazy stupid low-interest rate through a credit union, and pay off the car in half the duration of the initial car loan (as I did with my first car).
Follow the 1/10 rule: spend no more than 1/10th of my gross annual income on the purchase price of a car. The car can be new or old. Whether the car costs 10% of my annual gross income or less doesn't matter.
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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.