Expert Article

Buying Your Car on a Budget

Imagine the look on the valet’s face when you throw him the keys to your brand new Ferrari. His silence says it all as you walk away. But too bad that Ferrari doesn’t exist because you’re on a budget. Fortunately for you, I can help guide you through the daunting task of buying a car to make it feel like you’ve just purchased an exotic Italian car.

1) Lease or Purchase

There are many factors that influence your decision of whether you will lease or purchase your first car, but because this is for those entering college on a budget, the best option is to purchase the car. This way you own something. There’s some math involved that deals with opportunity cost, but let’s disregard that as a college student.

Now that purchasing a car is your decision, you may be wondering if you should buy a brand new car or a recently used car. But I’ll come back to this point at the end as it isn’t make or break. 

2) Safety

The first and most important element of a car is its safety rating. There’s no reason to drive a machine that can’t protect you through the average crash. The IIHS, or Insurance Institute for Highway Safety, rates every car on a scale of superior, good, acceptable, and marginal or poor based on the vehicle’s crashworthiness and crash avoidance and mitigation. Crashworthiness translates to how well the passengers are protected and crash avoidance and mitigation translates to the technology that can prevent a crash or lessen its severity. There are numerous technical details to determine a car’s rating, but long story short, you want a car that is an IIHS Top Safety Pick. 

3) Size

When looking at the size, there are three sizes to consider under $25,000: sub-compact (Honda Fit), compact (Toyota Corolla), and midsize (Ford Fusion). Size is probably the factor that will cause you the most frustration due to an infinite number of factors. To make this easier, I’ve condensed size into two major factors: comfort and cargo space. Comfort means how comfortable your passengers will be. As the driver, you should be comfortable no matter what, and this won't change based on the car. What will change is how much leg and head room your passengers will have. The other major factor is cargo space. Every car has different trunk sizes, and depending on how much room you need will affect the size of the car. Comfort and cargo space tend to be directly proportional. More comfort equates to more cargo space which equates to a larger car and also a higher price. 

4) To Hybrid or not to Hybrid

Probably the least important of your worries when buying a car on a budget.The age young question of whether a hybrid or conventional car is worth it. A hybrid seems better on paper with it’s attractive 40+ mpg, however this doesn’t come without a hefty price. Hybrids are generally more expensive than their conventional engine counterparts. The savings in fuel are not worth the premium price tag. Unless fuel prices shoot up to. Looking strictly at cost, buying a conventional engine is the way to go.   $700, $1,206 AT $3.50/gal, you would be saving ~$500 annually assuming 10,000 miles per year. This would require at least 6 years to cover the $3000 premium price tag. In the long run, a hybrid would indeed prove to be more economically sound than a conventional car provided that gas doesn’t become cheaper than water.

5) Brand

Similar to Size, there are many factors to consider when looking at the brand of a car. Because a car’s job is to get us from point A to point B in a reasonable amount of time, the car needs to be able to run as long as possible. Honda has the highest rated engines with only 1 out of 344 engines failing. The next closest company would be Toyota at 1 out of 119 engines falling. However these statistics aren’t the deciding factor as to which car will last the longest. Warranty also plays a huge role. Each car brand offers different warranty’s that can make your average engine last longer than Honda’s impressive engines. There are different kinds of warrantys such as powertrain and blah blah. Powertrain is the most important because it covers the parts that causes your car to move. Hyundai currently has the best warranty with 10 year/100,000 mile powertrain. The runner up would be, Kia, the subsidiary of Hyundai.