Should I Buy a New Car or Save for Retirement?
Are you thinking about buying a car? Will you need to buy a car at some point when you are retired?
Cars can be a big purchase, and you should think carefully about your car choice in terms of your overall financial picture. No matter when you need to buy a car, you should consider carefully whether to buy new or used.
The difference between thousands of dollars can be as important, or more important, than how much you save and spend every month. It may also be more important than how you invest your retirement savings.
Many people assume that financial decisions are quantifiable; in other words, financial decisions are just numbers. However, how you choose to spend your money is actually a matter of prioritization.
The decision to buy a new or used car – and how that financial decision fits into your retirement plan – is merely a question of your own priorities and preferences. What is more important to you? A new car or a few extra thousand dollars?
The real trick is to truly understand your financial situation. It may be helpful to ask these questions:
- Do you know how much you need to be saving for retirement now?
- Do you know how much monthly income you need to live comfortably in retirement?
- Will you be able to provide that much income for as long as you live, no matter how long that will be?
- Have you budgeted for a car now? As part of your retirement plan? Does your budget get you a new or used car?
The best retirement calculators will help you answer these questions quickly and easily.
Benefits of Buying a Used Car
When it is time to look for a dependable mode of transportation, you can save thousands of dollars by buying a pre-owned car instead of a new one. When you buy a used car, your payments are much lower than when you purchase a brand new car. Plus, the majority of the depreciation on that vehicle has fallen on the previous owner.
Used cars typically allow you to save money on insurance because, with a pre-owned vehicle, you may not need to pay for comprehensive insurance coverage on your car.
You will want to take advantage of any possible way to reduce your monthly payments as you approach retirement.
Often people opt for a new car because they would rather not spend money on maintenance for a pre-owned vehicle. However, if you run the numbers, you may find that it is still more affordable to purchase a used car (even with maintenance expenses). Though no one can accurately predict how much maintenance a car might need, it is very rare that you would pay more to maintain a high-quality vehicle than to purchase and depreciate a new automobile.
Tips for Buying a Used Car
When you are ready to find your next vehicle, keep the following tips in mind to maximize your money:
Pay Cash For the Vehicle
By borrowing money to purchase your car, you are only paying interest for something that is depreciating in value.
Purchase a Car That Is Built to Last
It is easy to get sucked in by a shiny new car that incorporates all of the latest technologies, but in the end, you should choose a vehicle that will last several years.
Recognize That Your Car Does Not Represent Your Value
Though some people appreciate a flashy car, ultimately, your vehicle does not represent your status in life.
Ensure Regular Maintenance
The best way to make sure that you are getting your money’s worth is to keep the car in great condition.
Know Your Priorities and Financial Needs
Though you might feel like retirement is the best time to enjoy a new car, this may not be the most beneficial financial decision. Skipping the brand new car is a great way for retirees to eliminate an unnecessary monthly expense and free up some funds for what is really important to you. Just know what you need and prioritize. Use a retirement calculator to figure out what you really need.