I am a city kid, born, bred, and raised in Manhattan. So only when I relocated to Los Angeles last year at age 28 did I find myself needing my first car. Sure, I had a driver’s license dating back to high school, but never before had I needed to use it.
Let me tell you, I was a mess. I asked myself, Should I lease or buy? Should I go new or used? What features do I even care about? What features am I supposed to care about?
Yes, I was especially inexperienced, but getting a car is a big decision for anyone. Not only does it require making a long-term commitment, but it also calls for a serious financial investment. It doesn’t help that every dealer will tell you something different, since unlike most goods, cars aren’t sold directly through their manufacturers. Seriously, imagine if the outpost of a store charged one price for a blouse in one state, and another in the state across the river.
All that is to say, I was—and still am—ready for some answers. But before coming to any conclusions, you have to ask the right questions. That’s why we teamed up with Cadillac, consulted the experts, and created this list of things to consider before becoming a car parent. Before you hit the gas, read on.
What will my life look like in a year? What about three? Five?
As a rule, if things are likely to shift significantly in the coming years, a lower-commitment lease—the most common term is three years—will make it simpler to change your car right along with your circumstances. “You want to make sure whatever planning you’re doing for the long term, your car would fit into that scenario,” says Scotty Reiss, founder of A Girls Guide to Cars. “There are a lot of people who get a raise, a new job, or a promotion and go out and buy their dream car. Then, within a couple years, they’re trying to figure out how to put car seats in it.”
Even if kids aren’t a factor, consider whether you might move from an area where you need a car to one where you don’t or whether you’re likely to make a significant income jump in just the next couple of years, leaving you in a place where you can afford a much nicer vehicle.
How much do I drive?
Many car leases allow you to drive 10,000 miles per year. Some come in as low as 7,500 miles per year and others as high as 12,000 miles per year. Naturally, the monthly payment on a lease with lower mileage is lower. But the second you exceed it, you are hit with hefty overage fees.
“I do know people who only drive 4,000 or 5,000 miles a year in their daily driving, and that leaves rooms for a couple really good road trips,” says Reiss. “It really comes down to how many miles you drive during a regular week.”
How much do I care about new and shiny technology?
While most cars made in the past few years have navigation, some type of lane detection, and backup cameras, things are likely to start changing more quickly. “In the next few years, there’s definitely going to be a lot more in terms of autonomous features and advanced lane assist,” says Michael Rapetti, co-founder and CEO of The Motoring Club, a membership club for car enthusiasts. “If technology and some of the new safety features are at the top of your must-have list, I suggest buying new or leasing, depending on how much you drive.”
Do I have credit and, if so, how is it?
“When buying a car, what you put down depends on your credit,” says Rapetti. Good credit could mean driving off the lot on the hook for just the first month’s payment, whereas poor or no credit could mean coughing up a 10- or 20-percent down payment. But the old wisdom that those who find themselves in the latter situation must pay up significantly no longer applies, according to both Rapetti and Reiss.
“If you’re buying a car, they’re much more transparent about the APR and the terms of the loan,” says Rapetti. “A lease is probably more appealing, because it’s easier to get one and feel like you’re not getting hit with a ton of interest, but at the end of the day, you are paying for it no matter what.”
“There’s more money available for financing leases and loans now,” explains Reiss. “The banks and lenders feel more secure. All indicators suggest we have a very healthy automotive market right now, so lenders are willing to offset the risk by charging higher rates.” To avoid paying a higher rate than absolutely necessary, Reiss recommends AutoGravity, an app that takes your information—your social security number, your income, the car you’re looking at, etc.—and spits out offers from up to four lenders.
Will the car I want retain its value?
“Buying used is the direction that I try to push most people in, because most cars depreciate quite a bit the first year,” says Rapetti. But if you’re after a brand that retains its value exceptionally well, it makes sense to buy. “You’re making payments for two or three years, and you’re actually going to be in the positive if and when you go to sell that car after a few years,” says Rapetti. Kelley Blue Book’s Best Resale Value Awards is a useful resource.
Can I resell my car down the road?
If so, buying is clearly your only option. Beyond that, Reiss recommends setting up your future self for success by opting for top state of the art—not to be confused with top of the line—features for your vehicle’s class. “If most cars in that class come with leather seats, then get the leather seats,” she says. “If most cars in that class come with the navigation system, get the navigation system. You don’t want something that has less market value because everything else you’re competing against is fully loaded.”
Have I done my homework?
As with negotiating your salary, negotiating your car price is all largely about doing your research, a.k.a. putting in the work. “Used cars can be the great bargain of all time,” says Reiss. That is if you’re willing to spend some time and money. “The first thing to do is budget for due diligence.”
You’ll need the upfront cash to get any car you’re considering inspected by an independent mechanic and to research competitive prices within up to 500 miles of you. “See what’s going on in your region. Become a very informed buyer. See what’s going on with the car,” she adds.
Whether you’re buying new or used or are in search of a lease, it’s key to negotiate based on the MSRP, not a monthly number. “This is the biggest mistake I see people make,” says Rapetti. “Use one of the calculators, like Kelley Blue Book, to give yourself a general sense for ‘if I want to lease or purchase a car that’s $X, what does that calculate out to a month?’
“Then, when you go into the dealership, say, ‘I’m interested in this car. The MSRP is X, and I know I can get it down $3K because the next dealer said he could shave that off. Can you sell it to me for $3.5K under the MSRP?’ When they say yes, start talking numbers in terms of monthly payments. Dealers have a really bad reputation, and I think that’s because if you don’t go in there prepared, you’ll walk out feeling very confused about the deal that you got.”