How to Buy A Car As A Student
Best practices and strategies for finding and paying for a car as a student
For many people college is a time for independence and for creating a self-image. It is a time to spread one’s proverbial wings and embrace all that life has to offer. And with the progression from high-school to higher education options, such as a college or a technical school comes a classic dilemma; what car will I drive and how will I afford to pay for it. As many people, myself included, have limited financial options when embarking on a student’s lifestyle there must be a strategy which will allow the student to have a stylish vehicle that is affordable. And while we cannot guarantee that you end up in a James Bond Aston Martin, the following strategies will get you behind the driver’s seat.
Be realistic with your goals
When I first started college, I saw a great many people going out and buying the latest model mustangs, BMWs, and even a few Harley Davidsons. Where these vehicles were great eye candy, they were impractical for the person that has an income of less than 12,000 a year plus student loans. What I found about these individuals that got the most lavish car is that often times, they had to return the vehicle or sell it because they could not make payments.
Before you pick out a car, make a list of what you MUST have in a vehicle and what you WANT to have in a vehicle. Often times you will find that a great many of the attributes that you think are a necessity are just wants. As soon as you have your list start looking for vehicles that meet your needs rather than your wants.
Buying new or used?
There is a misconception that buying a brand new car is getting a better deal than getting a used car. In reality, your vehicle loses a tremendous amount of its value the moment it leaves the car lot. Where the retail value (MSRP) was available for the “new” car, you are now only able to get the wholesale value of the car (which is always less). Combine this with the down payment which could buy a used car outright, and the option to buy new gets less appealing. This is the first thing that goes against buying new. But let us look at the actual price being paid and the value of the car.
According to Carsdirect, Edmunds, and a slew of other websites, a vehicle depreciates 15 to 20% of its overall wholesale price every year. So let us consider this: If you go to a car lot and look at a 2003 model which was worth 25,000 in 2003 it has 13 years of depreciation. If we calculate the value of the car to be 85% of the year before which is standard, then you should only pay $3,022 for the vehicle. Yet, looking at a dealership, it is very unlikely that you will find this sort of deal. In blunt terms, you will grossly overpay.
What is the cost to own?
Whether you buy new or used, your vehicle is going to have a cost to run it. I found this out the hard way as I did not allot the proper amount of funds to gas, oil, and emergencies. This oversight ended up costing me a few calls to AAA and an increase in my insurance payments. If you are buying a car and all of your funds are tied up in the payment and insurance, how will you keep gas in it. Let us face it, apart from the operation of the vehicle and insurance our funds are committed to food, school supplies, and dates.
So what do you do if you have a new car that you cannot pay for?
Where I knew a great many students that bought a car and then had to sell it, I would not recommend this option. For one, you are just starting out and your credit score is very fragile. Returning the vehicle or selling the vehicle will have negative effects upon your credit. And if you are looking to buy a more affordable vehicle, it may hinder that process.
A more viable solution is to use a title loan service to pay what is owed on the vehicle or to make a payment in an emergency. Most title loan services, such as Austin Title Loans, calculate the value of the car against the millage and give a loan accordingly. The benefit of getting such a loan is that you do not have to get a credit check, that the loan does not go against your credit so long as you make the payments on the loan, and the payments are generally lower than your current car and insurance payment. Plus, maintaining your vehicle and keeping your car shows your parents that you are not as irresponsible as they first assessed.
The bottom line
The bottom line to finding a vehicle for a student is to find a car that is affordable, within your price range (just calculate minimum wages by 40 hours and subtract living expenses), and low maintenance. By being responsible and strategic, you can own your own vehicle and avoid the shame of repossession and bad credit.