Car Buying: Doing Your Research
If it’s time to upgrade your vehicle or make your first auto purchase, proper research and a reliable financing solution can help you save both in upfront costs and over the life of your vehicle. Key topics to research include vehicle reliability and safety, comparing dealership pricing, and the financial impacts of depreciation.
The first step is to check the reliability and safety features of the vehicles you're considering. The best option for car research is Consumer Reports. These reports offer unbiased data gathered from thousands of sources on car reliability. No one wants to spend money or hours on repairs, so some research here is well worth it. Additionally, your car's job is not only to get you to your destination but also to keep you safe on the way. The Insurance Institute for Highway Safety crashes dozens of cars per year to provide consumers with detailed assessments of each car's performance in various crash scenarios.
Pricing is another important topic to explore since the prices people actually pay may differ from the sticker price for a new car or the asking price for a used car. Online research is the best way to find the average cost paid for each model and whether manufacturers offer dealer incentives to lower your costs.
When buying a used car, many factors can influence the price you’ll pay, but the best resource is the official National Automobile Dealers Association (NADA) Guide. Most public libraries have a subscription to this service, which offers retail, loan, and trade-in values used by both dealers and financial institutions. If time isn’t on your side during your car shopping experience, Edmunds.com offers a True Market Value (TMV) calculator with accurate pricing based on recent purchases in your location.
Once you’ve narrowed down your car choices, another factor to consider is the total cost of ownership. Many other expenses make up this total cost, including fuel and maintenance to vehicle depreciation in addition to the sticker price. According to U.S. News & World Reports, the difference between the fastest and slowest depreciating cars is staggering.
To get a better understanding of the total cost of ownership, let’s calculate the total cost of ownership on a hypothetical $20,000 new car financed with a $15,000 loan for 60 months at 15% interest.
- Cost of car: $20,000
- Sales tax: $1,400
- Excise tax: $1,200
- Financing cost: $6,411
- Registration/yearly inspections: $250
- Maintenance and repairs: $3,500 (varies from vehicle to vehicle)
- Car insurance: $4,000
- Gas: $14,400 (one $60 tank per week)
- Total expenses: $51,161
Value of 5-year-old car: $9,500 (purchase price minus $10,500 in depreciation)
Total Cost of Ownership: $41,661 ($51,161 in expenses minus $9,500 remaining car value)
If you’re looking to upgrade your ride or rate this season, First Harvest offers competitive new and used auto loan financing options as well as a flexible auto refinance program that works with your budget! To explore our current auto loan rates or to learn more about our refinancing and lease buyout options, visit our Auto Loans page!
