Buying Cars on a Budget

Buying a car

The time that you have dreaded for so long has finally come: Your current car is toast, and you need a new ride. The problem is that your budget for buying a new car is somewhat limited. What do you do?

Owning and operating cars is a huge but necessary expense in modern life today (unless you live in a city with great public transportation). For some people, the cost of driving is second only to the cost of housing. But not all cars are created equal, and not every car has to cost you an arm and a leg. With a little bit of work and some knowledge, you can find a vehicle that will get you reliably from Point A to Point B without blowing your budget.

We hope that you already know that new cars are for suckers, that leasing is a fool’s game and that borrowing money to buy a car is an expensive and risky strategy. We also hope that you’ve seen this day coming and prepared for it, either by saving for your next car or by keeping a good emergency fund. If you have a small amount of cash to buy a car, here are five tips that will help you get the most for that money.

1) Buy private when possible.

We have nothing against car dealerships — they’re legitimate businesses that serve a legitimate need in society (even if their sales tactics are overbearing). But because they’re for-profit businesses, car dealerships have to add a mark-up to every car they sell… which means that buying a car from a dealership is always going to be more expensive than buying it from a private individual. You can easily save $1,000 or more by cutting out the middle man and buying a car directly from a private seller, and there are so many online tools these days that it’s easier than ever to find people who want to sell. One caveat, though: You should have a mechanic that you trust check out a car before you buy it, just to make sure that you’re not getting a piece of junk.

2) Take a look at high-mileage imports.

As a general rule, cars that are made by Japanese companies (Toyota, Honda, Nissan, etc.) are more expensive than cars made in the U.S. And, as a general rule, they last much longer than American cars. (Yes, we know that there are exceptions, but the statistics bear these claims out in general.) So while an American car with 100,000 miles is coming close to the iffy zone, it’s not uncommon for a good import to make it to 200,000 miles or more.

The high mileage tolerance of imports is good news for car buyers on a budget. If you only have a few thousand dollars to spend, you’re likely to be better off buying a 10- or 12-year-old import with 120,000 miles than a five- or six-year-old domestic car with 75,000 miles. The car may not have all of the bells and whistles of a newer model, but the extra mileage that you’ll get before making big repairs or replacements will be worthwhile in the long run.

3) Do your research.

It seems like it should go without saying: In the digital age, there is no reason to go into a car-buying deal without a ton of information at your fingertips. Surprisingly, though, too many people still by cars based on emotional decisions and suspect negotiation techniques. Don’t be one of them: Study sources like  to learn the pros and cons of the type of car that you’re considering, and use the tools there or at blue book websites to see what the car is actually worth in your area. And don’t forget to use a service like Carfax to check on the real-world history of the car that you want to buy in order to make sure that it hasn’t had any major wrecks or repairs.

4) Say no to fees and up-sales.

If you do end up buying your used car at a dealership, the company will probably try to tack on a bunch of fees or up-sales to the deal. They may ask you to pay the salesman’s commission in addition to the price of the car, or charge much more for the title and license than they actually cost. Don’t let their fees blindside you — just say no and hold firm. And don’t buy into extended warranties or other extra protection plans that they try to sell you: These items are almost pure profit for dealers, and rarely pay off for customers.

5) Hold some cash back for emergencies.

When buying something expensive like a car, it’s tempting to use every last bit of cash you have to purchase the best vehicle you can get. After all, a difference of even $1,000 can make a huge impact on how nice a car you end up with. But this is an unwise move — no matter how badly you need a car or how small your budget is, you need to make sure that you hold back some cash in case of emergencies. After all, you’re buying a used car, which is likely to need service or repair sooner than a newer car would. And there are all kinds of other things that could come up in life and cost you money. Blowing all your free cash on a car leaves you dangerously exposed. Don’t let car fever wreck your emergency fund.

With some research, some strategy and some discipline, you can have a great experience with a used car. What’s the best used car deal that you’ve ever made?


Photo by Jack Dorsey. Used under Creative Commons License.

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