There are lots of reasons why you might consider selling your current car and getting a new one: maybe your financial situation has changed, or it’s costing you too much to maintain an older car, or your lease has expired and you have to decide what to do next. For the most common of these reasons, we’ve come up with pros, cons, tips to think about as you decide what next step is right for you.
You Have More Income Than Before
If your net worth has grown since you bought your current car, you might find yourself interested in nicer, more luxurious options. Maybe you’re craving a car with driving technologies, like blind spot warning, or other special features.
To figure out how much more you can afford for transportation, make a detailed budget that includes everything you’re spending on, like housing, utilities, groceries, shopping, entertainment and more. Crunch the numbers carefully to determine the max you can afford for transportation. When evaluating the price of a car, don’t base your decision on the monthly car payment alone, because the majority of the real cost is in the interest rate.
And don’t forget to take into account not just the purchase price but also incidentals like gas, insurance and parking. This will help guide your decision-making on whether you can afford the beautiful new car you’ve been pining for.
Also, before signing any paperwork, do your due diligence on what kind of credit score you might need to qualify for any great rates you’re offered. Sometimes, people will receive a quote, fill out all of the forms and drive away with the car before knowing for sure that they received the stellar rate they thought they had—only to get a call telling them they didn’t qualify, and that the payment will actually be significantly more each month.
You Need to Tighten Your Belt
Now for the reverse scenario: Maybe your financial situation has changed and you’re brainstorming ways to cut back on some of your expenses. Although it may seem intuitive that trading in a more expensive car for a cheaper one could help you save money, that’s not always the case.
First of all, if you’ve owned your vehicle for a couple years only and you’re not done paying it off, selling it now could have negative financial consequences. Plus, although you’d save in the short term by trading a more expensive gas-guzzler for a less expensive fuel-efficient model, you’d probably lose more on the new car’s depreciation than you would save on gas.
One way to rig the equation in your favor is to shop around for used cars instead of new ones. Since they’ve already been owned, they won’t depreciate as drastically as brand new cars. And buying used doesn’t mean you can’t get a car that you’ll love.
Maintaining Your Old Car Is Costing Too Much
When it comes to the actual cost of having a car, there’s a lot more to consider than the purchase price. How much is auto insurance? Taxes? Tags or license plate renewal? Fuel? Tolls? Parking? Then there’s the whole question of maintenance, ranging from regular expenses like oil changes and tire rotations to pricier burdens like incessant repairs on an older vehicle. Plus the cost of renting a car (or the nuisance of bumming rides) can add up fast if you need to leave your car in the shop overnight.
Even if you do follow the top tips for car maintenance, you might still find yourself shelling out to fix this or that a bit too often. In that case, it might make financial sense to consider a new vehicle, whether it’s literally new or just new-to-you, that will require less maintenance than your current car. If you’re not sure whether you’re spending too much, a common rule of thumb says that you should aim to keep your total car expenses to less than 20% of your income.
When choosing an alternative you’re hoping will cost less to maintain, take a look at the repair record of each particular make and model. Pay attention to problems with transmissions, brakes or electrical systems, and what it tends to cost for routine repairs.
Read more: 4 Ways to Get Rid of a Car
You Want to Buy Your Vehicle When the Lease Expires
Buying a used car and driving it into the ground will maximize your dollars to the utmost, but if you care about having the newest, most up-to-date ride, a lease might make more sense because you’re locked into your particular car for three years only. After that, you’re free to upgrade without worrying about whether the car you bought is fully paid off. When your lease expires, you generally have the option to buy the vehicle you’ve been driving around for the past three years. But should you?
Reasons you might want to keep leasing:
- You don’t actually want to own the car you’ve been driving.
- You might enjoy the maintenance-free lifestyle of leasing, especially if you’re nearing retirement age. Leasing keeps payments down and lets you move from car to car without much fuss.
- You’re skittish about long-term financial obligations like a big down payment or a car loan.
Reasons you might want to buy your car at the end of the lease:
- The buyout price is a good bargain. How do you know? Back when you signed the lease, you agreed to the car’s “residual value,” a predetermined estimate of how much it’ll be worth at the end of the lease. As a rule of thumb, if your residual value is less than the going estimate for the same car (a good place to check that is Kelly Blue Book), the buyout is probably a good deal. If it’s higher than that estimate, then the car is probably less than a steal.
- You love your current car and don’t want to gamble with whether you’ll like the next one as much.
If you do want to buy your leased car, try to keep your enthusiasm at bay and let your leasing company contact you first. This will help when it’s time to negotiate the price. Generally, buying the car will involve paying the residual value plus a fee (called a purchase-option fee) of a few hundred bucks.
Whatever your situation, the most important thing to remember when considering a new ride is that you want the car that makes the most sense for you, your lifestyle and your financial situation. Wheels up!
Keep Reading: How to Boost Your Car’s Sale Value
If you are paying reasonable monthly payments and the car is dependable, keep it don’t trade it in on a whim. When it is paid off, enjoy being payment free and take your family out to dinner.
No thanks on buying a new one. I drive the eternal Toyota Camry; however, if the winters keep getting as cold as the recent wave of cold, I might consider. Toyota Camry’s have few problems.
I am also not interested in all the new technology except for a GPS and maybe some back up warning. The new technology can cost you a lot, according to my repairman.
So what is next? I am willing to bet it is the driverless cars and there is good and bad about that. If the government owns them, then they can control us. .We could use better city transportation for seniors and anyone else that wants to save.
But I don’t need a car that is like a spaceship. I got in a new one the other day and it looked like she had two dashboards, one close and one farther away! I will leave spaceships to Elon Musk! What I want is batteries for electricity and goodbye “smart” meters.
Thinking about 2018 Corvette ZR1!
Ditto Sherri Lord, I drive an old car but the insurance costs go up.( No accidents or tickets) I’m looking also.
I have 2013 Hyundai Elantra but I have only had it for two and a half years and I am in a 6 years contract.
No money and I can’t afford another one
I purchased a 2017 vehicle a while back, and although it has numerous safety features and as I am retired and do not drive the miles I used to drive while working, I have not seen and reduction to my automobile insurance premiums. I figured with fewer miles driven and all the safety features, it would impact my insurance premium. BUT, it has not. I am very disappointed as vehicles with all the bells and whistles cost quite a bit extra than vehicles without. The thought when purchasing this vehicle it would provide a safer drive and reducing my insurance premiums. It didn’t happen!
Kenneth – We understand you are disappointed that you didn’t see a reduction in your auto insurance rate. We’d be happy to discuss this with you in more detail, please give us a call at 1-800-423-6789 if you are an AARP member or 1-877-896-9320 if you’re a non-member. Thank you.
currently have a 5th wheel camper on my auto policy with you. Tossing around the idea of trading for a motorhome. Will I still be able to insure it with my auto’s? Or do I need to also look for another carrier?
Bob – Thanks for reaching out. Currently The Hartford does not offer coverage for motor homes. Foremost Insurance Group is associated with AARP and insures mobile homes. With Foremost you can get a quote online or call 1-800-555-2510 for additional guidance.
would leasing a new car effect my insurance rates ?
Lucy – Thanks for reaching out to us. Leased vehicles require full coverage and certain leases require specific liability limits that may increase auto insurance rates. We’d be happy to discuss your specific circumstances in more detail, please give us a call at 1-800-423-6789 if you are an AARP member or 1-877-896-9320 if you’re a not an AARP member. If you already leased the vehicle, you can get a quote online.
Please let us know if you need additional guidance.
Take your pick…costs of repairs or payments on a new car. Also insurance,
licensing, etc
I also do NOT appreciate the “tattle tale” / black boxes on the new cars
which police can access.
When I was younger, I frequently traded cars…and spent a LOT of money.
Now I have a 1990 Toyota Camry wagon and a 1997 Chrysler SUV…
and my expenses are CONSIDERABLY less including avoiding dealers for
repairs.
I have a 2014 Chrysler 200 but it’s a gas hog..I had a Toyota Hylander unfortunately I was in a car accident but would like to get another one…i don’t care if an older used car then mine but one that is dependable like the one I had can you help me find one.
Thanks
I’m in a quandary and have been for several years if I should buy a newer used model Mercedes or a Honda Accord. I love the older Mercedes style boxy not the newer sleeker aerodynamic cars. I’ve been thinking about this each repair I make on the Benz. Nothing major but air cons car door lock and alarm. The engine is sound. What to do??
My wife will not give up her 2006 Audi A41.8 Turbo Cabriolet until it becomes unreasonably repairable
I have not received my new insurance care..
Darryl – Thanks for reaching out to us. We understand that you didn’t receive your new insurance ID cards and we apologize for any inconvenience this may have caused you. You can access and print your ID cards online or if you would like to request new cards be mailed to you, please give us a call at 1-800-423-6789 if you are an AARP member or 1-877-896-9320 if you’re a non-member. Let us know if you need additional guidance going forward.
Here’s a tip. There’s a $6,000 tax incentive to buying an EV auto. And there are some real bargains on 4-5 year old models of Chevy Volts or Nissan Leafs, or any hybrids. Let’s go fossil-free.
I’m way ahead of you. If you linked to my current policy you’d see that my old ride was recently stepped up to a Porsche 911 Carrera S. Now I’m rolling down the road, loving retirement !!!
My Saturn has 175 K miles on it and going strong. Our other car is low mileage but old (2001). We don’t need a newer car yet, but the thought of a new car scares me because all of the high technology (unfortunately that’s all that’s sold now). As it is I cannot figure out my tablet let alone a “smart car”.
I have a 1996 Honda accord EX.. It has upgraded features for that year..power seat, windows sun roof. I have kept it in excellent condition and my mechanic said I won’t need a new one for ever at my age.
And, I cannot afford a car payment. I love my Honda!
I still have my 2004 Toyota Camry XLE and she still looks and drives great. She has preventive maintenance every 6 months, which keeps her running like a Top. I have taken the safe driving course and done everything possible to keep my insurance payments under control, but no matter what I do, the premiums keep going up. I really wish someone would give a factual discourse on why insurance costs go up every year when the value of the automobile they are insuring goes down every year. The same goes for my home insurance, which also went up. I switched to Hartford because another insurance company was doing the same thing. Guess I’ll have to start looking again.
Shari – Thanks for reaching out. If you’d like to discuss the rate increase on your auto and home insurance policies, please give us a call at 1-800-423-6789 if you are an AARP member or 1-877-896-9320 if you’re a non-member. Please let us know if you need additional guidance moving forward.
I do not want a new car! I love my Audi A 5 sooo much.
I love my old 2004 Expedition which has 78000 miles on it .I bought it new and will stay with it until it dies .I just put new leather seats inside and had a new paint job done on it -It may cost more for gas but it sure will keep me alive if I get hit –
Thank you for this message–I am a Hartford customer and very happy with you. My new yearly bill is due Feb.5 and it has increased to $236 more. I called and they said it was because the cost of car repair has gone up (?).
I am driving a 2007 Mercury Grand Marquis LS Presidential. I am basically paying also, for the weight. I am thinking seriously about getting a smaller car, 4-cylinder–I like the Honda Element, the windows are boxed with perfect visibility. Also, the small Jeep model. Would like to know the yearly cost on each one of these before shopping. Thank you, Donna Carr
Donna – We appreciate your kind words and loyalty and we’re happy to have you as a customer! If you’d like to get an insurance estimate for the vehicles you are considering purchasing, please call 1-800-423-6789 if you are an AARP member or 1-877-896-9320 if you’re a non-member. Please be sure to have the following information available: year, make, model and estimated annual mileage. You can also quote a new vehicle online.
Are you aware that I bought a KIA soul in 2017.am not going to buy another car anytime soon. Thank uoy