Buying a New Car with Limited Funds

You'd love a new car but don't think you can swing it right now. But – you don't have a choice since your current vehicle needs thousands of dollars of work to make it safe enough for local travel, never mind road trips. If you have to have a certain type of vehicle instead of a compact car, such as an SUV or a pickup, you can buy a barely used vehicle to save quite a bit of money.

Go through your expenses to see how much you have left over every month. This would normally be your new car budget. However, you need more than what you have left over. Go through your expenses again to find spending you can cut.

For example, if you have the full cable TV package, remove a few movie channels. Or, you can opt to get rid of satellite or cable and go with Amazon, Netflix and some of the other less expensive options for TV. You can purchase local channels with some of these packages.

Once you cut these expenses, add them to the "leftover" money every month. Your goal is to get to the monthly payment for the vehicle you want or need. Once you cut everything you can, rework your budget with a car payment. When you look at vehicles, you know how much you can afford to spend on a monthly car payment. 

You can download a free monthly budget tracker to help you keep track of your monthly expenses and save money.

Choose several vehicles, then compare several features, including:

• Reliability;
• Ownership costs, including maintenance and fuel economy;
• Safety ratings;
• Safety features; and
• Other features you might want including power locks, remote start and a backup camera.

Keep in mind that the more features you add, the more money you will end up spending. While all these new features would be great, you can get along without them to get the vehicle you want.

Narrow your choices down to three or four vehicles. Visit your local dealerships to test drive the vehicles, then choose the vehicle that best fits your needs and your price range. Check different dealerships for specials they might be running for the vehicle you want, as they often run specials. 

You can research  vehicles online using several sites, including US News andEdumunds. You can find the value of your vehicle using sites such as Kelley Blue Book.

It depends. Sometimes you can find a used vehicle with low mileage – lower than 30,000 miles on it. You'll save a lot of money by going this route. However, you might have to wait a while longer to drive home in your new vehicle, and you do have to spend a lot of time checking the dealerships for their new stock.

Once you do find a used vehicle with low mileage, you have to be ready to act – they go fast! You should never buy a vehicle with tons of miles on it, or you're going to end up in the same place you are now – looking for a new car – sooner rather than later.

In many cases, you can lease a brand-new vehicle for much less than buying the same model. Dealerships often have specials on leases – they might have a low down payment special, or they might have a certain model they're willing to lease for a lower monthly payment simply because they need to move last year's stock.

However, leasing is not for everyone. Most dealerships limit the number of miles you can drive per year. If you go over, you will have to pay for the extra mileage. If you damage the vehicle and don't repair it, you will pay the dealership to repair the vehicle.

However, many dealerships also let you buy the lease at the end of the lease term. If your finances allow you to lease but now purchase, you'll have time to get them in order and can purchase the vehicle at the end of the lease. Always review the lease contract and make sure you understand it, especially if you plan on purchasing the vehicle at the end of the lease.

Make sure you don't have any surprises waiting for you. A higher credit score means a lower interest rate, which means that you can save more money every month. It also means that you can afford a more expensive vehicle – that SUV or pickup truck instead of a subcompact car that isn't really the best thing for taking trips with the entire family.

If your credit is on the low side, you can still get a car, but your interest rate will be higher, and you might have limited options. If you know what your credit score is before you go in, you will know how much car you can afford.

You can check your credit at any of the three major credit reporting agencies, including Experian, TransUnion and Equifax.

Clean up your old car as much as possible. Detail the interior and wash and wax the exterior. If the clearcoat or paint is peeling, you might not get anything out of a wax job, but you should still wash the vehicle. If the upholstery is torn, you might be able to find new seats in the junkyard that look new. If you can pick them up without spending a lot of money, replace the seats. It will help a lot in getting a better price. However, if the engine is on its last leg, you won't get much for it anyway, so you can save time and money and trade it in as-is.  

Once you have everything ready, make sure you take all of your personal effects out of your old car. Head to the dealership and work a deal for your next new – or new-to-you car or truck. Do not be afraid to haggle on the price with the salesperson. You might save yourself a few thousand dollars.