Buying a Car in College: What You Need to Know
Buying a new car is exciting, especially if you’ve had the same one since high school. Doing this by yourself in college, especially if you don’t have a lot of help from your parents or another adult, means you have a bit of work ahead of you. You’ll need to decide between new and used, dig into finances and much more to ensure you’re getting a fair and valuable deal.
Here’s what you need to know before diving into the car-buying process.
Consider the Difference Between Buying Used and New
There are benefits to buying both new and used, and knowing the differences between the two will help you decide which one is best for your situation. For example, a used car may be more affordable, but might also require more maintenance. That’s a cost to factor into the equation.
You should also consider the cost-to-own of any new car. Use the “Create Your Own” tool from Kelly Blue Book to compare what that would look like for the various cars you’re interested in buying new. In short: this helps you determine how much you’ll need to pay before owning the car—factoring in insurance fees, interest, and monthly payments.
With new cars, you should also consider leasing versus buying, which can be a smart option if finances are tight:
“When you are purchasing a car, the loan value is based on the entire cost of the vehicle, minus your down payment and trade-in value. When leasing, however, you’re only financing the depreciation that occurs during the lease term (most commonly three years), plus fees. At the end of the lease term, you simply return the car to the dealership,” according to U.S. News and World Report.
There are drawbacks to leasing as well, including restrictions on the number of miles you can drive during the lease term. Not to mention, leasing a car is like renting an apartment—in the end, you have no equity and the car isn’t yours to own and re-sell.
Double Check the Finances
Finances are confusing for college students and adults alike, which is why it’s important that you feel confident with the information in front of you. From loan repayment to needing co-signer, here are the financial details to pay attention to:
- Know what you can and can’t afford, based on credit score and monthly income: “… Being unfamiliar with or in denial of your financial situation leads to two things: Higher-than-advertised interest rates and manipulation by the salesman due to your ignorance of your own financial status,” explains Karina Reddy, with HerCampus.
- Know if you need a co-signer: If you haven’t built enough credit, you’ll need your parents or another adult to co-sign the car loan for you. Don’t let yourself get through the whole process just to find that you can’t walk away with the car that day. If you need a co-signer, bring them with you to go through the paperwork and sign on the dotted line.
- Know the cost of auto insurance. Just like each person has a driving history, it is important to realize that insurance may cost differently for each car you are considering. According to Jean Marie Huff, President of MyLifeProtected, a national insurance technology platform that enables consumers to compare insurance quotes and secure discounts on coverage.
- Take your time to get the whole story: “Read the entire financing agreement. Don’t let anyone pressure you to sign it immediately. Watch out for prepayment penalties, binding arbitration clauses, and adjustable rates. The printed terms supersede all verbal statements,” advise experts at Auto.Loan.
Know the Benefits of Working With a Dealership
Just because you‘re working with a dealership, doesn’t mean you have to buy new. Most dealerships also sell used cars, and the benefits of buying used with a dealer, rather than a private used seller are many. Here are a few to consider:
- Dealerships often sell their used cars as “Certified Pre-Owned,” which means the vehicle is less likely to have problems thanks to a rigorous inspection process.
- Dealers let you trade in your old car, which will reduce the amount of money you have to put down. If you don’t have a lot of money to give up front, this is a helpful option.
- Dealers are bound by state and federal laws that many private sellers are not required to follow, including implied warranty. Most private sellers don’t offer a warranty, and if they do, it’s likely minimal compared to a dealership option. (Get more information about warranties from the Federal Trade Commission)
- The dealership handles all of the paperwork. With a private seller, you share the responsibility of handling bill of sale, transfer of registration and title, and tax paperwork.
With all of that being said, working with a private seller isn’t automatically a bad idea. It may simply require that you do more research to find a reputable seller.
Buying a new car is exciting. Don’t get wrapped up in the thrill of it all and forget to do your due diligence. Keep these details in mind as you start the car buying process to make sure you get a fair and valuable deal.
This post was contributed to GradGuard by Jessica Thiefels
Jessica Thiefels has been writing for more than 10 years and is currently a full-time writer. She’s written for Reader’s Digest, Lifehack, SoFi and more.Follow her on Twitter, Facebook and Instagram for health articles, new workouts and more.