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sharperedgeengines Used Engines , Transmissions The Hard Truth of Car Shopping: What You Want Isnt Always What You Need

The Hard Truth of Car Shopping: What You Want Isnt Always What You Need

The Hard Truth of Car Shopping: What You Want Isnt Always What You Need
The Hard Truth of Car Shopping: What You Want Isn't Always What You Need
Illustration by YonilCar and Driver
  • The average new-car buyer spent $32,119 in mid-2019.
  • Far too many people borrowed that money over 72 or even 84 months.
  • See some in-budget choices for buyers with a range of annual incomes in the images below.

    We all have that friend, the one who buys a new car loaded with every electronic knickknack even though he can barely keep up with the payments. At some point, you've maybe been that friend. With car loans at record-high balances and terms lasting longer than the typical celebrity marriage, impulse decisions in the showroom are costing Americans more than ever.

    According to Experian, in the second quarter of 2019, new-car buyers on average borrowed $32,119. More people turned to 72- and 84-month terms. Talk about a seven-year itch. These loans coupled with good-credit interest rates ranging between 4 and 6 percent ensure that buyers end up paying a lot more than the number on the sticker.

    So where's the relief? AAA repair systems manager David Bennett says what we all hate to hear: What you want isn't what you need. "Don't take the short-term view," he says. "Look at the life changes you'll have over the life of the loan" and budget accordingly.

    Make a down payment if you have enough liquid savings. And resist rolling large balances from an existing car loan into a new one. According to Edmunds, 33 percent of new-car buyers did just that in the first nine months of 2019 and had to take on longer loans, higher monthly payments, or both.

    Looking at the driving costs for the top-selling models in each segment and assuming a yearly total of 15,000 miles traveled, AAA determined the weighted-average tab for what new cars really cost: Including insurance, tax, maintenance, fuel, financing, and depreciation, it's more than $9000 a year. For that kind of money, those red brake calipers had better be cooking you dinner.

    Reality Check

    Ask five different people how much money you should spend on a car and you'll get five different answers. Your real budget will depend on factors like your debt-to-income ratio, how much of your paycheck goes to fixed costs, and whether you're nursing a secret gambling addiction. Personal-finance expert Dave Ramsey says your vehicle should cost no more than half your annual income. As car lovers, we interpret that to mean you can spend half. These images are our in-budget picks for four different pocketbooks. Have fun shopping, but be rational.

    Source:caranddriver.com