College Grad: New Car Now or Wait?

College Grad: New Car Now or Wait?
  • Opening Intro -

    You’re about ready to turn the tassel on your graduation cap, signifying the end of one chapter of your life while getting ready to embark on the next one.

    If everything has gone as planned, you have a job lined up or you may be planning to return to school in the fall to pursue your master’s degree.

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One dilemma facing recent college grads centers on transportation. You may have a job, but you don’t have a vehicle to transport you from your home to your place of business. If you live in New York or some other public transportation rich city, you’ll survive quite nicely without a vehicle and save a bundle in parking fees and related car costs by taking the bus, catching a cab or jumping on the subway.

If you live in suburbia or are far from a job, you’ll need your own set of wheels to get you to work. This is where new grads face a common issue: finding a way to get to work when personal transportation is necessary. If you already have your own car or you can drive the family car, then the issue isn’t pressing. For everyone else, time is of the essence — you need a car soon.

Should you buy new? Should you buy used? What other options do you have? Let’s explore your choices and what they may mean to you, the new grad:

New car — Major automotive manufacturers want your business and are willing to sweeten your best deal with a discount for new or recent college grads. One of the most generous deals is a $1,000 college graduate rebate from Scion, Toyota’s youth brand. Buy a new xD, tC or xB and you can save on models that already are priced well below $20,000. Ford, GM, Nissan and Honda are among other manufacturers offering discounts too.

Used car — Your used car options are many. You can buy through a private party, through a car dealership, via eBay or through used car superstores such as CarMax or Auction Direct. Prices can vary dramatically with private deals usually offering the best value. However, if a warranty is important to you, consider buying a late model used car from a car dealer or used car superstore.

Financial Considerations

New grads need to keep some things in mind before buying any vehicle. Most important, is the debt you’ll be taking on if you must finance your vehicle. Yes, you’ll need at least $5,000 to buy a decent used car, funds few grads have at their disposal. If financing a new car, your interest rate will be lower than the interest rate on a used car, but payments will likely run several hundred dollars a month and may last 48 or 60 months, perhaps longer. Figure out your costs before committing to any purchase by using a loan calculator first.1 Take into consideration all of your expenses including rent, utilities, food, clothing, student loan repayment and other expenses. That 335i may be a beauty, but your budget may be closer to a Ford Focus or Hyundai Sonata.

Credit Considerations

How is your credit history? Lots of grads may wonder what their credit picture looks like after attending college these past four or five years and working part-time or seasonally. Consider obtaining free copies of your credit reports from AnnualCreditReport.com to find out what creditors are saying about you. 2 Pay the extra $5 to $8 to obtain your credit score, a three digit number useful to help you find out where you stand. Scores of 700 and up “suggest good credit management” according to Experian, one of the three major credit reporting bureaus.3 Likely, your score is lower unless you’ve built up substantial credit over the years. Lenders will determine your loan rates based on your credit score.

Practicality Considerations

You may be enticed by a particular make/model vehicle which is understandable: many car buyers are. It can be hard to make a practical decision, but you’ll be glad you used your mind and not your heart to buy a car. Today, consumers keep their cars much longer than just a few years ago, with the media age of cars 10.2 years according to R.L. Polk.4 That means taking into consideration where you may be several years from now: perhaps married and with a family.

Your Decision

Yes, buying a car — used or new is a big decision. As of this publication, a gallon of regular gasoline costs $4 which means your buying decision may be dictated by as much as what you pay at the pump than anything else. Take into consideration the warranty you’ll get with your vehicle, find out what your car insurer will charge you and keep in mind maintenance, repairs and property taxes and other fees as applicable. Finally, consider leasing if you need a new car and you expect your plans to change after three or four years. With leasing, you enjoy the benefits of driving a new car and can return it after lease term.

References

1 CarSurfer.com: Loan Calculators

2 AnnualCreditReport.com: Home

3 Experian: What is a Good Credit Score?

4 R.L. Polk; Polk Finds More Vehicles Scrapped than Added to Fleet; March 30, 2010

 

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Categories: Campus Cars