This is the story of a car researcher, buyer and now, owner. This last summer I made my very first adult purchase of a beautiful blue Subaru Impreza! It’s an excellent “first” car for me and I’ve loved the feeling of accomplishment that comes along with it. But the process was definitely not the easiest thing I’ve ever gone through. It took a lot of time, effort and opinions from many people.
The thought of buying a new car was just a “maybe” for quite some time and I was in no rush to put my pedal to the medal because I had my parents’ sweet van that had been getting me where I needed to go for seven years. But then I spoke to my parents one night and they helped me decide that I should get on top of things sooner rather than later to take on the winter with sturdy and reliable transportation. So I started my daunting search.
Shift into Gear 1: Research
I knew I wanted a Subaru because my family has good history with Subaru’s and the all-wheel-drive aspect was at the top of my priority list. So I set myself a budget of how much I was comfortable committing to each month based on my monthly income and made an appointment with Subaru of Spokane.
I also knew my credit score. That is incredibly important when starting the search. You can save yourself hundreds of dollars by having good credit because you will snag a lower rate on your car loan and end up paying less interest. So if you aren’t in a good place with your credit yet (do you know your score?), make that your number one priority before going through the car-buying process. Since I felt confident in my credit placement, I moved forward.
Shift into Gear 2: The Pursuit
I walked into Subaru of Spokane with a solid and confident mindset of my budget and what I wanted in a car. Of course, it’s unrealistic to think I’m going to get EVERYTHING I want with the budget I have at 22 years old so some things I had to flex on. Once I understood what my options were for a car with the amenities I wanted WHILE staying within my budget, I felt a little bit overwhelmed. All of the used Subaru’s I could afford had a lot of miles on them. I’m not very tech savvy when it comes to cars, so it was important I got one with low miles so I have a longer time with the car before it starts to have little issues here and there (normally that happens at about 100,000 miles). I quickly learned cars are much more moolah than you think they are.
But sure enough, I found a diamond in the rough—this beautiful blue Impreza!
Shift into Gear 3: Education
I went to the Credit Union and talked with one of our Loan Officer Extraordinaires, Cindy. We looked at the NADA value of the car (NADA is an association that provides new, trade-in, loan and retail values of vehicles—it’s all the information you need to know what a vehicle is really worth) compared to what it was actually going for at Subaru of Spokane and I was able to get the price down to what I was hoping for.
Shift into Gear 4: Finances
So now it was time to actually go through the car-buying process. My first suggestion is to save up as much money as you can before buying a car. Yes, you have the option to do 100% financing (where you pay the car price in full through loan payments), but you pay much less interest if you can put a solid chunk of change down right at the beginning. For example, I put a $1,000 down payment on my car which allowed me to take out a loan for my car that was $1,000 less. I would even set a goal of higher if you can—perhaps $2,000 or maybe even $3,000?
Then I needed to decide what loan term I wanted. Cindy and I created estimates of how much interest I’d pay depending on different loan terms. I decided on a seven-year loan to set myself up with a lower monthly payment—awesome, right? Yes, but also take caution; it may be nice to have lower monthly payments, but be aware of how much interest you’re paying over the life of the loan, too. I was fully aware I would pay more interest with a seven-year loan rather than a five or six loan. You see, it’s all about education—about arming yourself with the information you need in order to make the most logical and financially fit decision for yourself.
The reason I took out a longer loan, fully aware that I would pay more in interest, is because I plan to make additional principle payments (none to interest) each month for my car so when my actual payments automatically come out of my savings at the end of each month (with interest included), I end up paying less interest because my total owed balance is lower. Another reason I made my loan seven years is because if I have a tighter month with my budget, I can choose to pay only the minimum balance (the additional payments I make are if I have the means to do so). I fully intend to pay off my loan long before seven years and so I will end up paying less interest than if I paid my car off over seven years.
PHEW…that was a lot to absorb. I hope you’re still with me! It’s a bit of a journey and so I can’t emphasize enough how important educating yourself is when making such a big decision that not only affects you now but also later.