The following post is by Amanda Green. Enjoy!
While many American cities have excellent public transportation systems – take New York, for example – some places aren’t so lucky. People who live outside urban areas often need cars to get to work, or buy food, because the public transportation system is limited or unreliable. Even people who live within urban areas can have problems – Atlanta, Detroit, and Miami are all considered some of the worst cities for commuters. If you live in an area with less than adequate public transportation, you may have no choice but to own a car.
Unfortunately, cars don’t last forever. If you have an older car, you might be considering replacing it. However, doing so can be an expensive proposition – newer cars often require financing that means high interest rates, high monthly payment, and higher insurance costs. How do you know when it’s time to replace your older car, and how do you get another without going broke?
How to Tell it’s Time
The biggest sign that it’s time to call it quits is if your repair costs increase. All cars need some maintenance and repair as they age and the longer you have the car, the more likely you will need to spring for a big repair. However, there’s a big difference between having to replace the brakes one year, and then the alternator a couple years later, and having to make repairs on a quarterly, or even monthly basis.
For example, if you have to replace the brakes in the fall, then the alternator that winter, and the fuel pump dies the following summer, it’s probably time to replace the car.
While it’s true that the cost of repair could be less than the cost of buying a new car, the fact that the repairs are coming so fast and furious could mean that your car is on its last legs.
Another sign is if the cost of ownership is greater than the cost of a new car. For example, if you have an older car with low gas mileage, that only takes premium, you might be better off with a newer model with more flexible gas requirements and better mileage. If it has a lot of foreign parts and needs to go to an expensive specialty mechanic for routine oil changes, you might be better off with a less unique vehicle.
Tips for Picking Your Next Car
· Check consumer resources like Bankrate, Consumer Reports, Banking Sense or The Wall Street Journal, for up to date financial information on auto buying, insurance, and credit – all the things you will need when buying another car.
· Determine how much you can afford to spend on everything, including the car payment, insurance, gas, and maintenance.
· Determine the type of car you want. For example, if gas mileage is a concern, you might consider a hybrid or electric car.
· Determine its use. If you’re just driving alone to and from work, and running basic errands, a compact sedan could be fine. If you plan to take a lot of road trips, or do a lot of carpooling, a larger sedan or a van might be a better choice.
· Decide if you want to go with used or new.
With used cars you don’t have to deal with the huge rate of depreciation, and you can often find vehicles with lots of bells and whistles for less than you would pay for new. Unfortunately, used cars also have mileage, wear and tear, and hidden problems that only show up after you have driven it off the lot. Services like CarFax can tell you about the vehicle’s past, but you may still need to have a mechanic look at it.
With new cars you are less likely to inherit mechanical problems or encounter wear and tear. You can also pick the potions you want instead of taking whatever is available. Unfortunately, new cars are so expensive that most people have to take out financing to purchase them. To make matters worse, most cars depreciate by nine percent the second you drive off the lot. Within a year it could lose another ten percent, and by year two it could have lost almost thirty percent of its value. That means that car you financed for $20K in 2014 will only be worth about $14K in 2016.
After five years the rate of depreciation slows significantly, so your best option might be to purchase a used car that is between three and five years
