As the year unfolds and new opportunities arise, it’s a good time to think about your transportation needs. Whether you’re in school or planning your next steps, purchasing a car can be a crucial factor in achieving your goals. Statistics show that 76% of Gen Z buys their first car before 21, a sharp increase from the 56% of millennials who did the same. According to a Capital One report, 70% of respondents said their car gave them a sense of financial stability—something to consider as you weigh your options, whether for a new home or campus life.
If you’re feeling hesitant, it’s understandable. Deciding between a new or used car can feel overwhelming, especially if your dream car is out of reach. But with some flexibility, you can find a used vehicle that suits your future needs without the pressure of purchasing a brand-new model. In fact, 55% of Gen Zers opt for used cars, and with the right research, buying used can be a practical solution, saving you from the hassle of relying on public transportation or ride-sharing services for work, school, or social events.
Whether you choose the excitement of a new car or the financial relief of a used one, buying a vehicle can be a smart long-term decision. Here are a few tips to guide your purchase:
1. Consider Your Budget
Before anything else, take a hard look at your finances. Factor in your monthly expenses and set aside money for a down payment. In 2024, the average down payment for a new car is about 14%, while for used cars, it’s closer to 10%. A larger down payment can lower monthly payments, reduce interest rates, and offer better protection if you trade in the car later. Don’t forget to account for additional costs like registration, inspections, and license fees.
Skipping a down payment may be tempting, but it could lead to higher interest rates and bigger monthly payments. If you’re planning to finance, aim to save as much as possible to avoid owing more than the car is worth.
2. Assess Your Needs and Choose the Right Car
Think about how you’ll use your car in the long term. If you just need a reliable way to get from point A to point B, a smaller car may be sufficient. However, if you need extra space for friends, equipment, or long trips, consider a larger vehicle.
For entrepreneurs, here’s a financial tip: If you have an LLC, you can purchase a car through your business under Tax Code 179. If the car is used for business purposes more than 50% of the time, you can deduct the full purchase price. A G-Wagon or Porsche may not be out of reach if the car meets the weight requirements and is primarily used for business. Just be sure to keep detailed records of your business-related travel.
3. Check Your Credit
If your credit score isn’t where you’d like it to be, consider making small purchases on a credit card and paying them off to build your credit. Once your score improves, contact banks for pre-approved loan offers. This can make the car-buying process smoother and help you avoid being caught off guard by the dealership’s terms.
Financing is a common way to purchase a car. In fact, 80% of new cars and 57% of used cars were financed in the third quarter of 2024. The average loan term for both new and used cars is around 67–68 months. In 2024, the average interest rate for new cars was 6.61%, while for used cars, it was 11.74%.
4. Negotiate Smartly
Negotiating can be an enjoyable part of buying a car if you’re prepared. Start by researching dealerships and reading customer reviews to get a sense of their reputation. This knowledge will help you negotiate more effectively and ensure you’re dealing with a dealership you trust.
Remember, buying a car is a business transaction, so try to keep emotions in check. Some dealers may try to extend the loan term or upsell you on unnecessary extras, which could cost you more in the long run. Many dealerships follow a no-haggle policy, but with research, you may still be able to negotiate a price closer to the invoice cost. Additionally, avoid paying extra for add-ons that you can often find for less elsewhere.