Back in 2006, I purchased a fire engine red Dodge Neon. I loved my car; for $20 I could fill up the tank and drive 150 miles south home from my college campus. The maintenance for my car was fairly inexpensive and although my car wasn’t featured in the latest rap video, it was mine. 6 years after purchasing my neon, my baby started having some issues, so my she spent the last few days of her life in the tow yard. As my husband and I sat in the living room contemplating the purchase of a new vehicle, I began to hyperventilate. I knew that I didn’t want a new car because of the expenses that came along with it; I would have another monthly obligation also known as a car note, higher maintenance fees, and physical damage coverage added to my insurance policy instead of the state mandated coverage. As we began to shop for a car, we noticed most dealerships wanted to sell me on the monthly payment. They kept mentioning so much down, and then so much each month. Antoine and I decided to take a few steps back, and evaluate the contract along with our goals. The information we learned was nothing less than alarming.
As we took a few minutes to dissect the agreement, they did exactly what they said they would do. Our monthly payments were at a rate of $250/month…what they didn’t disclose is it would take about 5 years to pay off the total amount of the loan, and cost us way more than what we wanted to actually pay for the car. After having a lengthy discussion, we came to a few conclusions…check them out below:
- We will not shop for the monthly payment. Between the depreciation on vehicles, the potential interest rate, and the life cycle of the car, we could be stuck paying for a vehicle not worth much in a few years. While monthly payments are important, we have to look at the big picture and determine what’s best for our pockets not just now, but also the future.
- Lease or purchase? We knew that with the lease we could have monthly payments within our budget, but I drive 40 miles to work round trip daily; I would be paying for those extra miles in no time.
- Just because we are approved for a specific amount doesn’t mean we have to spend it all. We were approved by our credit union for an amount that would allow us to get a brand new vehicle but we have financial goals we are trying to meet so we found something that would get the job done. We decided on a newer car, that wouldn’t break the bank.
- Remember the extras. Those extra expenses add up. Before saying yes to the car, we determined if the vehicle needs regular or premium gas, how many miles we could get to the gallon, the cost of insurance, and estimated cost of license tags. These twos and fews ultimately rolls into the entire expense of the car.
After extensive research, we discovered that deal wasn’t the best deal for us after all. We were able to settle on a nice car for our budding family without the headache of overextending our pockets.