As our nation seeks to get everyone back to work without worsening the coronavirus pandemic, many people are snatching up used cars so they can have safe transportation to their jobs – not just safe in sense of being free from auto accidents, but safe from COVID-19.
This fall, some people aren’t looking to go back to public transit, ride-sharing, or carpooling. That means those who used to rely on those forms of transportation are shopping for cars.
Car buying is an important category in anyone’s budget, and something we deal with often as we help people manage their personal finances. We have some tips for people thinking about car buying during this pandemic:
New cars are always a tough investment to justify. They depreciate in value faster than any other asset, and a good used car offers the same benefits for a much lower price. This year presents some especially tricky considerations. Because auto manufacturing plants were largely closed during the height of the pandemic, new car inventory is down, driving up prices for all cars, new and used alike.
Many people balk at used cars because they don’t know the full history and want to be sure the car was treated well by its previous owner and will be as reliable as a new car would have been.
Edmunds.com reports that this year, used cars are going to be a bit higher priced than usual, but the blue book services seem to be taking those fluctuations into account, so the values you find for particular models should be reasonably accurate.
If you’re worried about the reliability of a used car, consider going through a dealership rather than an individual sale, as dealerships will more likely have ways to verify a car’s condition and offer some kind of warranty.
Buy an Older Model
A car that is a few years old will be much more affordable, but don’t go back too far. More recent cars are more reliable in general, and have better features for safety and efficiency, saving you money on gas and auto insurance over time.
Review the Car’s History
Major car rental companies are moving old inventory onto the used car market, and it’s safe to say you don’t want a former rental car unless you get a very good deal on it. Better to have a car you know the provenance of and are sure wasn’t put through heavy use as a commercial vehicle.
Generally speaking, leasing a car is typically not as good a deal for you as buying a used car. While the month-to-month costs of leasing are lower, in the long term you don’t own your car, and will be stuck in some kind of monthly payment forever.
Leases are also rife with traps that can be hard to avoid. Limits on mileage, condition, and customization of the car underscore that you don’t own the vehicle you’re driving, and the true owner will expect it back in a good condition so they can sell it to someone else. If they decide your leased vehicle has “excessive wear and tear,” you’ll have to pay at the end of the lease. There’s simply no way you can have a firm idea of what your dealer will consider normal wear-and-tear in a few years.
That’s not to say it’s never a good idea to lease. For some very specific customers, a lease might make more sense. But this is one of those things where if you have to ask, a lease isn’t right for you. If you’re a good candidate for a lease (you use a car a consistently low number of miles, you get an auto allowance from your employer, you always need a brand-new car for chauffeuring clients, etc.) then you’re probably not reading this article. If you have any doubt in your mind about leasing, you shouldn’t be considering it.
These days, more car-buying options are presented online, with virtual tours to help people avoid needing to visit a dealership and take any health risks. It’s still important to test drive your car purchase and ensure there’s nothing obviously wrong with it.
Online auto retailers have built-in policies to let car buyers back out of a purchase if they have a problem. One major online car dealer gives a 400-mile, 7-day guarantee—that’s much better than the typical dealership test drive, so used car buyers who shop online shouldn’t worry too much about the lack of a test drive.
There are also ‘contactless’ test drives offered by traditional dealers. Dealers who offer this feature will deliver the car to your home, sanitize it thoroughly, and let you test drive it before moving forward with a purchase.
Do the Math
Is buying a car really the right move? Consider the full costs.
The average American drives 16 miles each way to and from work. To hire a car for that drive would vary widely from one city for another, but the national average is around $2 per mile. So, you’re looking at $32 each way to get to work and home again, times 5 days = $320 per week! Even if you’re in a relatively inexpensive city and your ride to work is only $.90 per mile, you’re still paying $288 per week. That means a car payment would be justified and still save you money vs. hiring a car every day. (Of course, remember in addition to your car payment, you’re spending $20 per week on gas and $30 per week on auto insurance). The average used car payment is $391 per month, plus $80 for gas and $120 for insurance = $591. That’s still cheaper than hiring a car.
Of course, none of these financial considerations take into account the risk of getting into a taxi, Uber or Lyft with a driver that might have been exposed to COVID-19 by the previous passenger. If avoiding public transit makes sense, it’s probably also a good idea to buy your own used car for the same reasons.
Get Some Education
Buying a car is a major investment, so it’s worth spending some time and learning about the process. The more you know going in, the more you’ll save, so every minute you spend doing research will pay off.
The internet is so full of information, some of it contradictory, most of it subject to change, so it’s hard to know where to go for reliable info. Start with our Deals For Wheels material, available as a free resource from our downloads page. From there, expand your search online and learn about the cars you are interested in, how to buy them, and how you plan to pay for your purchase.
If you’re going to be borrowing for a car, a credit report review is a good idea to ensure you get the best loan rates and your first application is approved. And if other debts are making it difficult for you to fit a new auto loan in your budget, talk to a debt coach about how we can help you create a plan to become debt free.