My legal team doesn’t like me to use other brands’ names when I’m penning these columns. So, I’ll keep it general. About 10 years ago, I bought the vehicle of my childhood dreams. It was used, German, and, in driver’s circles, known by three numbers, two of which were “1.”
It should have been something to celebrate, but instead it became a nightmare for a variety of reasons. If we meet, ask me about it and I’ll share the details, but my point here is to help you avoid a similar mistake.
To steer clear of a whole lot (pun intended) of financial and emotional regret, here are five questions to ask yourself before you buy your next vehicle:
- Does it fit my budget? Obviously, that’s a question that will vary based on your situation, but if you can cap all your transportation costs at around 10-15% of your gross income, you should be on track. That includes gas, maintenance, insurance and the like. Yes, I know that can be a tall task, but the goal is to have less financial stress and more flexibility.
- Can I afford what it’s really going to cost? Notice, how I slid maintenance, gas and insurance into the auto budget discussion above? You should too. When you’re making the decision, factor in all the costs to determine if you’ve got a good fit. In the opening, I didn’t mention the hit our car insurance premium took when I parked that beautiful German rocket in my garage…ugh!
- Am I getting a decent loan? Too often, I run into people with high double-digit interest rate car loans. In today’s interest rate environment that’s a problem. If your credit history keeps you from qualifying for anything but that type of loan, then you should buy nothing but bare-bones transportation while you work to put yourself in a better credit position.
- How long will I be paying? Remember, the longer the term of your loan, the more you rack up in interest and the more likely you’ll be upside down. Yes, that means the eight-year loan you’re looking at to squeeze too much car into your budget is a bad idea. Shoot for a loan of five years or less.
- Does this vehicle fit my lifestyle? I couldn’t even fit my golf clubs in the car, let alone my kids and dogs. Who was I fooling? Buy something that works for you (and perhaps, your family) and a vehicle you can drive for years to come, not something that you’ll regret in short order.
If you’re heading down the path toward a purchase and can’t answer all these questions with a resounding “yes,” you may be setting yourself up to experience the same type of regret I did.