What to Spend on a Car if You Don’t Want to Go Broke

Two months ago I got rid of my beloved 2007 Chevy Equinox and got a new-to-me car. Even though I had vowed to drive the Equinox until it died with the birth of my third daughter the car was no longer practical.

Most weekends I had at least one extra kid and our family could no longer leave the house when we had weekend guests. When we did leave the house we had to take two separate vehicles to accommodate all the kiddos.

It was a hassle. An extremely annoying one.

But I insisted that we’d make it work. I fought my husband tooth and nail on it. He had been looking for a new car for months and I just wasn’t having it.

Spend 10% or Less of Your Annual Income on a Vehicle

Even though I was really beginning to get annoyed by our car situation there was NO way I was about to make a rash decision and splurge on a vehicle. I’ve had car payments before and in no way, shape or form do I want them again.

I decided to go with Financial Samurai’s 1/10^th car rule. I always thought this seemed like a pretty smart financial guideline and now that I actually needed to buy a vehicle I put it to the test.

(If you’re wondering, the 1/10th rule is exactly how it sounds – spend 10% or less of your annual income on the purchase price of a vehicle.)

So, I gave my husband a list and it proved to be a tough one. Here was my criteria:

• 7 or 8 passenger SUV
• Leather seats
• Neutral Color
• Well maintained
• Preferably a Chevy
• Under $10k

It took him 6 months but he finally found the car. We ended up with a one owner, 7 passenger Acadia with leather seats, a neutral gray/blue color and we got it for $8,200!

(We also currently have my Equinox up for sale which should go for at least $3,000.)

Obviously, finding the car wasn’t easy. It took six months of my husband looking nearly every night. It also took me saying “no” to about every car he showed me. We did have one pretty big advantage though, my father in law owns a used car lot so my husband had access to auction sites. He’d check auctions, Facebook, and Craigslist every night. Besides this vehicle there was only one other I was interested in and it was an auction car. We bid low and didn’t get it. (Thankfully.)

Besides searching for months, which was the biggest factor in us finding exactly what we wanted at this price, here are some of the other things we did that proved to be smart choices.

Buy Used

Do you know what the average new car price is in 2018? $36,270!!

Do you know what happens as soon as you drive that new car off the lot? It depreciates. Yep, you lose money the second you buy.

There’s a misconception that buying used means buying junk. It’s just not true.

It’s completely possible to find a quality used car. Your best bet is buying a one owner car that has been well maintained. You can also look for used cars at car lots that have a good reputation of being fair, honest, and treating their customers right.

Finance it Right

While I followed the 1/10^th rule for buying the car this rule was also especially helpful because it meant that we had enough money in the bank to cover the car without taking out a loan.

If you can, I highly recommend you save up cash for your purchase.

I understand that life happens and saving up to pay for a car isn’t always possible. (A few years ago it wouldn’t have been possible for me either.) In this case I would first, check with the dealer to see what type of rates you can get on a loan and then I’d check rates at a local bank.

If you plan to bypass a dealer and buy directly from a seller I’d check in with local banks to see what type of rates they can offer you. In my experience getting loans from local banks is much easier than going through the big banks.

Trade In or Sell Your Current Vehicle

When you’re upgrading your car one of the silver linings is that you can trade-in or sell your previous car.

If you’re buying from a dealership the easiest thing to do is trade in your vehicle but that’s not always the smartest choice.

You can check Kelly Blue Book to see what the going rate for your car in your area is. If it’s WAY more than what a dealer wants to offer you in trade-in value then you can try listing your vehicle yourself on Facebook Marketplace or Craigslist.

Take Your Time

The number one most important thing you can do is take your time.

If you flippantly decide to buy a car, chances are you’re going to spend too much, not get exactly what you want, and then become regretful. (Been there.)

If you think you’re going to need a new car soon start planning a few months in advance so you have ample time to find what you want at a price that fits your budget.