How to Pick the Perfect Car
Picking the right car can be a daunting task. New models are rolled out frequently or discontinued, names change, and color and option packages are always in flux. Luckily, you’ve come to the right place.
In this post, we’ll provide an overview of the basics of picking the perfect car to ensure you are able to make an informed decision when it comes time to buy your first car or replace a current vehicle. If after reading, you still have questions, come on over and book a free consultation with one of the experts from our team. We have decades of experience in the automotive industry and are obsessive in our research about cars.
Financial Considerations
Budgeting
The first step in deciding which car is right for you is determining your budget. This can unfortunately be much easier said than done due to the many factors in play. Many car shoppers will make the mistake of focusing solely on a monthly payment they can afford, which dealerships love. (Hint: if the people selling you a car want you to focus on something, it is probably in your best interest to do the opposite).
Let’s say you are looking for a car that is around $40,000, but you are really focused on the monthly payment, which you decide needs to be around $550. You walk into the dealership and see a beautiful sedan sitting on the showroom floor, sparkling under the indoor lights. You can smell the leather seats as you walk by and can even see your reflection glimmering off of the perfectly polished paint. Listing price: $39,999.
Time to make a deal.
You walk back to the salesperson’s desk and tell them you love the car but can only afford to pay $550 per month. Unfortunately, at the current listing price, with a $10,000 down payment, 60-month term, and 7% interest rate, the monthly payment comes out to $594.02 per month. Heartbreak. You just can’t quite afford to pay that much each month.
“Not a problem,” promises the salesperson. “It’s our job to make a deal. I’ll talk to my manager and see what we can do.”
A few minutes later, the salesperson walks back in triumphantly. “We did it! My manager was able to get you approved for a special loan. We can get your monthly payment down to $518.69.”
What the salesperson neglected to tell you is that the actual purchase price did not change… but the loan did. The down payment remains the same at $10,000, but the term has increased to 72-months, and, subtly, the interest rate has gone from 7% to 7.5%. Not only will you need to make payments for an entire year extra, you will pay nearly $2,000 more in interest over the course of the loan. Does that sound like a “special” deal to you?
Of course not. That is why we recommend setting your budget based on the total price of the car, not a monthly payment that can easily be manipulated. It is fine to think about affordability in terms of monthly payment but do this at home to experiment with different prices, while keeping the loan terms the same. This can easily be done with online resources such as Calculator.net. The person in the example above, could have negotiated the price down and considered a slightly higher down payment. A $1,500 decrease in price and $500 extra down payment would result in a monthly payment of $554.43, very close to the target number.
Leasing vs. Buying
Should you buy or lease a new car? This decision, like many others in the process, will largely come down to personal preference. There are some general benefits and downsides to each that may make the decision easier, and we are always happy to discuss our clients’ unique situations in order to help them pick the best option.
Leasing
Leasing is great for people who want a new (or nearly new) car at all times and less hassle with repairs, trade-in values, etc. and do not mind paying for these benefits. Some folks love having a shiny new car at all times and the freedom to get something else every two or three years. Maintenance costs are low during the first few years of ownership and all repairs (other than damage caused by the driver) will be covered under warranty. Finally, when it comes time to get something new, a lease allows you to just drop the car off at the dealership and move on. No need to hassle with selling your car privately or comparing trade-in values.
However, potential lessees should be prepared to pay for this convenience. Most new cars have the steepest depreciation curve in the first few years of ownership (the average depreciation of a new car is 20% in the first year of ownership), and this cost will be paid by you through the lease payments. Additionally, when you lease a car, it isn’t truly yours (since you will return it to the dealership at the end of the lease term). Because of this, there are limitations on the number of miles you can drive each year and requirements on how maintenance and repairs must be performed. Otherwise, you risk incurring a penalty.
Buying
Depending on how long you want to own the vehicle, buying a new car might be much more cost effective than leasing. Depreciation can vary drastically between different makes and models (and even different colors of the same model of car) and is also impacted by total mileage, wear and tear, and other items. However, all else being equal, a car will depreciate the fastest in the first year of ownership and then depreciate slower every additional year. For example, a car may depreciate 45% in three years and 66% in the first six years. For a three-year lease, this car will depreciate an average of 15% each year (45% divided by three years); however, if this same car is purchased new and owned for six years, the average depreciation is 11% per year (66% divided by six years). If you own the car for longer, the average depreciation per year will continue to drop.
Further, a purchased car is fully yours. You can drive it as much as you would like and sell or trade it in at any point (with no pressure to hold the car until the end of the lease term to avoid additional fees). However, you will of course miss out on the thrill of having a new car every few years and will be on the hook for maintenance and repairs once the new car warranty expires.
Buying New vs. Used
The decision between buying a new or used car will generally come down to similar factors as the choice between buying or leasing. How much is the shiny new car worth to you?
A used car will typically cost much less than a new car, since the years with the highest depreciation have already occurred (someone else has paid the cost of this steep depreciation). Depending on how often new or updated models are released, you can get a two- or three-year old car that is nearly identical to a brand new car for as little as half the price.
Aside from missing out on that “new car” smell and the knowledge that you are the first person to own your car, there are a few additional downsides to buying a used car. Since warranties only last for a specified number of years or up to a certain number of miles, a used car will spend less time covered by a manufacturer’s warranty (or no time at all if the car is old enough). This can mean that you are on the hook for a costly repair if one arises a few years down the line. Similarly, unless you buy the car from a close friend or relative, you will have no idea how the car was cared for by its prior owner. Was the car always kept in a garage, detailed every month, and given regular oil changes and maintenance, or was the car neglected and abused - a ticking time bomb of expenses for the new owner?
We typically recommend purchasing a well-maintained used car since it is hard to escape the tremendous bang-for-the-buck (around three-years old is generally regarded as the sweet spot for value), but we realize every client has unique needs and wants so we work closely with each individual to determine the best choice. We also closely review vehicle history reports and maintenance records to help gauge how well the vehicle was taken care of under prior ownership.
Picking the Right Car
After setting a budget and deciding whether to buy or lease a car, the process of picking a car is just getting started. With new models being released or discontinued constantly, names being changed, and a seemingly endless list of option packages, it can be a challenge to even know where to begin. While this is the most subjective portion of the car search, we have included some general tips below that can help make sense of this process and help you get on the right track of finding the perfect ride.
What Type of Car
The simplest place to start is what type of car you want and need. Already have an SUV you plan to keep? Maybe a convertible is what you need to provide some excitement on the weekends. Haul a lot of people around? Maybe a minivan or large SUV will suit your needs.
In doing this, it is important to think about certain items and features you will require in your car, both now and in the future. If you’ve been eyeing a two-door performance car but plan to start a family in the next few years, it may make sense to instead look for a sport sedan that has the performance you crave with the practicality to accommodate your growing household.
There may be some crossover after you’ve determined what is absolutely necessary. For example, a large sedan may check many of the same boxes as an SUV. At this point it may come down to personal preference - is the lighter weight and better gas mileage of the sedan preferable or do you prefer sitting higher up and having more trunk space in an SUV?
Make and Model
Once you have determined the type of car you need, you can dive into various makes and models. We recommend spending some time performing research online to help with this portion. Resources like Motortrend and Car and Driver can provide useful resources such as a ranking of makes and models in various categories of vehicle, road test information, and head-to-head comparison tests against cars in the same class. Consumer Reports is also useful to determine the quality of certain vehicles and the average reliability for specific makes and models.
It is important to research carefully and specifically, as things can change quickly. Cadillac, once known as a car for wealthy retirees, has recently been reinventing itself and now builds excellent sports sedans and surprisingly luxurious SUVs. Similar cars may also change over time. The B8.5 Audi A4 (produced from 2013 to 2016) was much less powerful than the BMW 3-Series and Mercedes-Benz C-Class of the same time period; however, with the introduction of the B9 version in 2016, the A4 was once again able to compete effectively with its rivals.
As mentioned, this decision is highly subjective. We also think it should be at least somewhat emotional. It certainly makes sense to research and find what is the best car for you on paper, but nothing can quite compare to actually driving the car. We always recommend driving a few cars that might suit your needs to see which has that intangible “feel” that is right for you.
Cost of Ownership
It is also imperative to calculate cost of ownership when determining which car to buy. Many car shoppers have found a great deal on a car at an affordable monthly payment only to realize that insurance is hundreds of dollars more than anticipated or get hit with an expensive repair within months of buying a used car that was not properly cared for by the prior owner.
Cost of ownership is largely made up of the following categories:
Depreciation: How much the car will decrease in value during the expected period of ownership. This number can be drastically different for different types of cars (new luxury cars tend to depreciate faster than standard cars, because wealthy people that can afford to buy them like to be seen in a new car every few years) and different brands (an Audi will tend to depreciate slower than a Maserati).
Insurance: The price of car insurance can vary widely based on different makes and models (even between two cars that are the same price). Many insurance providers offer free quotes online, so you can compare the price of two cars before you decide on which to buy.
Maintenance and Repairs: It is important to break down the expected cost of both routine maintenance (yearly oil changes, new tires, etc.) and potential repairs. Maintenance prices can be determined online or by calling a service department. Estimating repair costs is difficult, since two cars of the same make and model may have completely different issues. Information regarding average cost per year can typically be found online, and, when buying a used car, it is imperative to understand the service history to ensure minor problems were discovered before they become catastrophic failures.
Fuel: Simple enough to calculate but worth mentioning here.
The items above are just the basics but hopefully help to arrive at a more accurate feature for the monthly cost of a car. However, these can also get vastly more detailed. For example, certain “sport” packages on cars will include different wheel sizes front and back to increase handling performance; however, this means that tires can no longer be rotated, effectively halving the life of your tires. Additionally, the same make and model of a car may have issues only in certain model years. The 2005-2008 Porsche Cayman S may be prone to a catastrophic IMS bearing failure; however, this issue is almost nonexistent in 2009 and newer cars.
Options
Options and option packages can get confusing very quickly. These also vary widely between manufacturers. A Genesis G70 2.5T has two packages (Standard and Sport Prestige) and three optional accessories. Meanwhile, a comparable BMW 330i has two options for exterior looks, seven option packages, and 11 standalone options, some of which are included in certain option packages.
It can feel like deciphering what option packages mean and which ones make sense for the money requires a college-level course. Online forums can be a helpful place to hear what others think are the most necessary options. This is also a scenario where going into a dealership can be useful, since the salespeople will likely be trained to provide an overview of the various options. However, always keep in mind that dealers want to sell you what they have available and may try to talk you out of the sport package you want because they don’t have one on their lot.
When purchasing a used car, determining exactly which options the car is equipped with can be even more challenging. For the BMW 330i in the example above, options can add well over $10,000 to the $44,000 MSRP - so when looking at a used model, be sure to know whether you are getting a stripped-down version or one with the full spate of luxury and sport options.
Conclusion
We hope the overview above is useful when you decide it is time to buy your next car. Doing proper due diligence and research is imperative when deciding which car to buy, and the basics above are just a starting point (we could write pages and pages of the specifics of each of the categories above).
If the information seems a little overwhelming, book a free consultation with us today to see if we can help simplify the process for you. Our team has decades of collective experience in the automotive industry - click here if you’d like to learn more about us. We are certified car nerds, spending hours researching cars and reading about new models. Above all, we love sharing this experience with others to help them save time and money!