Here’s the latest reader question, along with my reply!
Fernando asks: I am from Brazil and moved to the US last year. I need to buy a car and a friend told me to get in touch with you to get information, in particular: What should I have before buying? Insurance? Should I finance part of it? Is it possible to get something under 5k? Preferably under 3k? What about maintenance costs? Any ideas on how much should I be saving for it? What about taxes and bureaucracy in general? Anything else I should be aware of?
My reply: Well, let’s take each question one at a time!
As regards what you should have: Knowledge about what you want to buy – and how much you ought to pay for it. This means (first) figuring what make/model/year vehicle interests you and then learning as much about it as possible, including its strong and weak points as well as the fair market value for a given example, based on condition/options and miles, etc.
You do not need (are not required) to have insurance before buying. Only once you have (and are driving) the car. Part of the process of buying a car is to find out what it will cost to insure it – before you buy it. This is easily done; just call several insurers and ask them to give you a quote. Rates can vary significantly from model to model and the cost should be considered before you buy the car.
You can lower the amount financed by putting down “x” percent of the purchase price; this will reduce your monthly payment and may shorten the duration of the loan. However, it may be more advantageous to finance the entire purchase in order to have cash on hand for others needs. Much will depend on the interest rate (cost of money) and also how comfortable you are with debt. This varies considerably from person to person.
Yes, it is possible to get a sound used car for $5k or even $3k; but you will have to shop around and shop carefully. Probably, you will also have to be willing to drive an unpopular model; e.g., a used minivan or other vehicle that isn’t a “bad” vehicle – just one that isn’t considered desirable (and so, isn’t expensive).
Maintenance ties into the above. The lower-priced the used car, the more likely it will need maintenance. The questions here are – what kind of maintenance? How much will it cost me? Is it maintenance I can perform myself? Maybe the car just needs its oil changed, new brakes and tires. These are not Big Deals and even if you have to pay someone to do the work (e.g., the brake job) it’s not a deal-breaker unless the cost is disproportionate to the deal; i.e., the value/price of the car. It is a very good idea to have any used car you are thinking about buying inspected by a competent mechanic, so you know what it’s going to need before such needs become your problems. You can used maintenance needed as leverage, too. Ask the seller to lower his price in accordance with the cost of the needed repairs.
It is always a good idea to have $1,000 in the cookie jar for just-in-case (and not just for car repairs).
As far as other taxes/bureaucracy: In some states, you will be paying personal property tax on the vehicle. Look into this before you buy because – once again – the cost of this tax should be factored into your buying decision.
Many states also have emissions checks that must be passed before the car can be registered and plates. I strongly recommend making this a condition of any purchase; i.e., that the prospect “pass smog” before money changes hands. You do not want to be holding the keys to a car that you cannot drive (legally) because it failed “smog check.” Nor the bill, for getting whatever’s not in order put back in order, so that it will pass.
Hope this helps – and please feel free to post follow-ups!
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