Are you thinking about buying a car this year, but have no idea how to go about it? Buying a car is a big financial decision, and one you shouldn’t just rush through over the course of a weekend.
Start your research with these 10 car buying tips to help you find an affordable car that also fits your lifestyle.
1. Figure out your car budget
Let’s start with a bit of a reality check: new cars drop in value like a bag of rocks, losing 60% of their value in the first five years!(1) This isn’t a smart investment. You really should only consider buying new if you have plenty of money to burn.
With that out of the way, your first step is deciding what you can afford to pay for a car. Leasing a car and going into debt to buy one are both bad ideas, so what you can afford is based on the amount of cash you can pay up front.
If you don’t have the funds for a used or certified pre-owned car right away, you’ll have to make room in your budget to set money aside each month. Figure out where you can get by on less and how much you can afford to put toward your car fund.
Remember, leasing or financing a car will not help you build wealth. It’s much easier to save around $500 a month (the average car payment(2)) for 10 months and buy a used car with no strings attached. Do you really want to sign up for a payment plan and pay thousands of extra dollars for several years?
Key Takeaways & Strategy from Dave Ramsey
1. Always Buy Used Over New
Rapid Depreciation: Brand-new cars lose roughly 9–11% of their value the moment they drive off the lot, 20% in the first year, and around 60% over 5 years. Buying used allows someone else to absorb that initial drop in value.
Lower Total Cost: Used vehicles are cheaper to buy, tax, and insure overall.
2. Pay 100% Cash (No Car Loans)
Ramsey stresses avoiding monthly car payments entirely to eliminate interest costs and prevent becoming “upside-down” on a loan (owing more than the car is worth).
If money is tight, he advises buying an affordable “point A to point B” vehicle for cash while saving up for a better upgrade down the road.
3. Follow the “50% Rule” for Vehicle Value
The total combined value of all household vehicles (cars, trucks, motorcycles, boats) should not exceed 50% of your total annual household income. This keeps too much money from being tied up in fast-depreciating assets.
4. Focus on Needs vs. Wants
Prioritize practical daily requirements (fuel efficiency, reliability, passenger capacity) rather than luxury tech packages, all-wheel drive, or oversized engines.
Focus on proven, reliable used models like Toyota Corollas, Honda Civics, or Mazda CX-5s.
5. Essential Buying Checklist
Research Value: Check Kelley Blue Book (KBB) or Edmunds and pull a vehicle history report (e.g., CARFAX).
DIY Inspection: Check fluid levels/color, tire wear, paint condition, lights, and air conditioning/heating.
Professional Pre-Purchase Inspection: Have an independent, trusted mechanic inspect the vehicle before making an offer.
Negotiate & Walk Away: Paying with cash gives strong leverage; be prepared to walk away if the seller won’t agree to a fair market price.
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