We’re thrilled to collaborate with Beepi to bring you the full guide on buying your first car after college. Beepi is a new way to buy, sell or lease a car all online. Thanks to industry-leading guarantees and no-hassle shopping experience, Beepi is making car ownership easy, stress-free and even fun.
Along with learning how to buy groceries and foraying into the world of employment, buying a car is high up on the list of things you’ll probably need to do when you graduate college. Even if you were able to get around your campus with a bike, there’s a good chance you’re going to need more robust transportation to get your adult on.
So where do you start?
First things first, take a breath and remember that patience is key. Although you may be tempted to buy the cheapest junkyard-find you can get your hands on, buying a car isn’t a small decision. Do your research and know what you’re getting yourself into.
Here are a few questions to ask to make sure you’re on the right track.
What Steps Can I Take to Establish Credit for a Car Loan?
Unless you’re buying your car in cash, you’re going to need to take out a loan, and that requires credit. One of the easiest ways to establish it is to have a long standing line of credit you’ve paid off consistently over time. Opt for a credit card, but make sure to spend within that budget and pay it off on time.
Sticking within your budget means not maxing out your credit card. Even if you pay off your card in full each month, maxing it out will ensure your credit suffers. Make sure to only spend a small portion of your available credit; loading up a credit card is only ever cool in music videos.
What Percentage of My Monthly Income Should I Aim to Spend on Transportation?
There’s no one size fits all answer to this question, but there are some things you can figure out to better help you decide. Here’s one way to figure out your expenses: write down your income and break it into 50, 30, and 20% portions. The 50% portion should make up your fixed costs, 30% your flexible costs, and 20% your wealth-building.
Then, figure out which transportation costs are fixed, and which are flexible. For instance, the gas needed to drive to and from work every day is a fixed cost, while that set of chrome wheels you’re eyeing is a flexible cost. Both are great, but need to be handled differently. Fixed costs include things like rent and electricity, while flexible costs could be things like going out to dinner or buying new clothes.
Once you know which expenses are necessary and which are optional, you can better figure out the dollar amount you should be putting toward transportation in general.
How Much Will My Car Cost?
Monthly expenses will vary depending on the kind of car you have, how much you drive it, and the city you’re driving it in. Everyone’s situation will be a little different, so hone in on exactly what you can expect to pay monthly for your four-fendered friend by considering these three factors:
In dense cities like San Francisco and New York, parking can cost more than gas. Keep in mind that street parking isn’t possible in a lot of neighborhoods. If you don’t have a free spot, make sure to get a firm quote on how much it’ll cost to park before moving forward.
Gas costs are easy – just estimate your monthly driving needs and multiply them by average gas costs. However, be wary! Gas costs are at an extreme low right now, so leave a 20-30% appreciation margin. Curious about where to find the cheapest gas nearby? Apps like GasBuddy can help you out.
Just like you have an annual checkup at the doctor’s office, your car will have yearly “health” expenses. Let’s tally up the cost of these maintenance charges.
- Every 5-7,000 miles, you’ll need an oil change, which will cost $40-50.
- You’ll also need to replace your brakes every 40,000 miles or so, which will cost around $300 – more for performance vehicles.
- Set aside $500 for a tire replacement every 60,000 miles.
- Add to that $99 a year for Triple A (it’s worth it), an average of $900 for car insurance, and a $1,000 fund for emergency repairs; you can probably tell that the expenses are adding up even if you didn’t major in math.
- If you drive a 30 mpg car 15,000 miles next year, assuming you don’t use your emergency fund, you’ll still spend $2,786 on maintenance, or $232 a month.
While that may seem like a lot, if you start saving and investing right now, you have the potential to rack up compound returns. While we wouldn’t recommend going into substantial debt to buy yourself a car, if you set aside a little money every month, that annual price tag of $2,786 might turn less daunting.
Having a car is awesome, but you’ll need to do research before you take the plunge. Calculate how much car-ownership will cost you in exacting detail before you go out and buy yourself the vehicle of your dreams.
Now, The Fun Part?
Well, almost. The first step to not getting hosed when you buy a car is to do a lot of research. If you can’t answer these questions, you’re not ready for anything more than a casual test drive:
- What year, make and model of car are you interested in?
- What trim level, precisely, do you want?
- What are three colors that you would accept?
- What options packages will you be getting?
- What is the car that you want worth? Combine Edmunds, KBB, and TrueCar to research.
The number one tool that salespeople will use to try to make more money off you is called upselling. They’ll hear that you want a 2012 Honda Civic with the basic package and say, “Well gee, we have a car that would be perfect for you, but it has the luxury package. Hey, it’s only $2,000 more…”
That’s your cue to march right out the door. Playing around with negotiation and option swapping is far more likely to end up putting money in the dealer’s pocket than yours. Know what you want, what it’s worth, and stay resolute.
One more thing: never take anything you hear from the person trying to sell you a car for granted. Once you find a car that you like, exercise your right to have it checked out by an independent mechanic. These are called “pre-purchase inspections” and companies like YourMechanic will even come to you.
NOW, The Fun Part
Now that you’ve examined your finances, considered the costs, and done your research, you’re better prepared to find yourself a set of wheels. This is the part you’ve been waiting for, after all. So get your adult on in style.
Adam Griffith is Beepi’s Content Manager – responsible for making sure every sentence makes sense and every picture looks great. He’s about two inches too tall and overuses exclamation marks. What’s the harm in a little extra enthusiasm?
Header image credit: Javier Caldo