Itís that time of year when thousands of people will take off the cap and gown and head out into the world. For many, a new car is on the horizon, but you could be vulnerable without doing your homework. If you are graduating, youíll want to read this information. If you know someone who is graduating, please feel free to share this:
Youíve studied hard for 4 or 8 years, possibly longer. You have sweated and fretted over exams. You pulled all-nighters trying to study for that exam you didnít feel confident about. Now youíve walked the stage, you received that sheepskin, you threw your cap in the air, and itís time to get that much-deserved new set of wheels. So, what do you do now? Here are some tips that will help you.
Decide on the basics
Spend some time before you car shop making some decisions, or at least narrowing down the choices to avoid frustration. You should be able to decide whether you are most interested in a new or used vehicle. Are you thinking car, truck, or SUV? Give some thought to what is most important to you, and donít say safety. All vehicles are really safe these days, but is your priority fuel economy, appearance, headroom or legroom, etc? If you decide to go with a brand new vehicle, decide whether you should buy or lease.
Use the research skills you have learned
Not making a mistake buying your first post-graduation vehicle will be one of the hardest exams you will ever take. The Internet is your friend, and it can be your enemy as well. Websites like mine, CarProUSA.com offer you a ton of useful information that is unbiased, like car reviews and advice on purchasing. Government websites like fueleconomy.gov and safercar.gov will also give you good, factual information. What you do not want to do is to get wrapped up in forums or chat rooms. The information cannot be verified as true, and I can get online and find bad things written about every car ever made. If you are shopping used, keep in mind that none of the used car pricing sites are accurate, and they could be either high or low and they can be way off.
Beware getting your dream car
It is tempting to just ďgo for itĒ. If you come out of college and secure a great job that pays very well, you may be able to get that vehicle you canít quit thinking about. For most, however, this first purchase should be for practical purposes, getting you to and from work, to and from home, and a way to shop and go see friends and family. The dream car can wait until you are in a better position financially.
Know your budget
Once youíve landed that job, do a budget based on your net or take home pay. Figure housing costs, gasoline, know how much your car insurance is going to run, groceries, clothing, and come up with an amount left over after all that. Then take 15% of that for emergencies and entertainment, and what is left can be your car payment. I would try not to use the entire amount, itís funny what life can throw at you sometimes and you need to be prepared. Having a savings account is always a great idea.
Look hard at leasing
As I say on the air, leasing is not for everyone, but if it will work for you, itís a great way to save some money. Be sure you understand the terms, conditions, and mileage limits on a lease. If all that works out, you can get another new car three years down the road, and your wants, needs, and desires may be totally different then. You donít have to worry about any expenses except gas and routine maintenance with a lease. Lease direct from a new car dealership, not a 3rd party lease company no matter how good the ads sound.
Be careful choosing a dealer
Getting your first new car after graduation should be one of those moments you always look back on fondly. A bad car dealership can ruin it for you. There are great dealerships out there, you just have to know which ones they are. Again, online information can be misleading and manipulated. One site I do recommend is DealerRater.com, it is legitimate and offers good information based on buyer feedback. If you happen to be in an area the CarProUSA Show airs, I vet the dealers I send listeners to very carefully.
Look for incentives and watch the loan term
Most automakers offer additional rebates for recent college graduations. They typically range from $500 to $1000 and that is on top of the other factory incentives out there. Most captive finance companies look very favorably on lending money to college graduates. You will have to prove you graduated, and be subject to proving employment and your debt-to-income ratio.
Also, donít stretch out a loan to get a comfortable payment. Although 72 month financing is popular these days, try to stay to 60 months. If you canít do that, you may be looking at too much car. If you lease, go 36 months and no longer than 39 months, tops. Stretching the terms of a purchase or lease will make it impossible to trade cars again for a long time.
First, congratulations on your milestone. A new vehicle can be a great reward for your hard work. Think ahead and donít get over your head with a car payment no matter how badly you may want a car. Should that happen and you lose the car due to non-payment, youíll be banished to tote-the-note lots and driving junk for many years. No car is worth that.