6 Money Moves Boomers Should Make Before Buying a New Car
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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The average boomer is already retired or soon to retire, which typically means that your financial picture has narrowed, making it necessary to budget, spend less money overall and be more financially savvy.
For boomers who are ready to buy a new car, this might not be as simple as in your working days when you could count on a higher amount of income or savings to put toward the vehicle of your dreams. Buying a car now requires some careful planning.
Here are six money moves boomers should make before buying a new car.
Get Lender Quotes
Before you even begin scrolling Carvana or step foot in a car dealership, boomers should get quotes from lenders to find out what financing they are approved for and what they can expect their monthly payments to be, according to Melanie Musson, an auto industry expert with CarInsurance.org.
Work Out a Realistic Payment Plan
Once boomers know what they’re qualified for, they still need to think carefully about what kind of payment plans make sense with their budgets, Musson said.
“If they’re on a fixed income without a lot of extra to spare, they should not consider buying a brand-new luxury vehicle. Instead, a dependable, low-cost car would be the only feasible option,” she explained.
Make Sure It Works With Your Budget
Boomers should work out a car budget, Musson said, “because if you don’t and you spend more than you should, you’re going to hurt your financial stability for the duration of your retirement,” she said.
Retirement is a time when it’s extremely difficult to catch up if you fall behind on payments for anything.
Save For a Down Payment
If boomers want cars that are a little outside their budgets, they should save for down payments before they purchase these cars, Musson said. “A down payment will help make monthly payments lower and it will help them avoid being upside down on their loan when the car depreciates,” she said.
Additionally, if they don’t want to pay through financing, but prefer cash, Musson said, “You’ll need to make sure you have enough of your assets liquid so you can accomplish what you want.” This might mean withdrawing more money from a retirement account and putting it into your savings account. Brokerage and money market accounts may take time to transfer funds, so you’ll need to account for this.
Find an Intuitive and Accessible Car
Another important move for boomers, many of whom learned to drive on cars with few of the technological bells and whistles of today’s cars, is to “look for a car that is intuitive,” Musson said. She pointed out that new cars have a lot of electronic features, which are great if you know how to use them, but she pointed out, “Some electronic systems are easy to figure out and others are frustrating. Play around with the system when you take a test drive.”
Also, be sure look for vehicles that are easy to get into and out of, Musson stressed. “As you age, accessibility may become a factor, and a low-riding vehicle might become too challenging to get out of.”
Consider Leasing First
Another option, especially for people who may have fewer driving years ahead of them than behind, is to consider leasing a car, according to Zander Cook, co-founder and chief revenue officer (CRO) of Lease End.
“You’ll generally get lower payments for the three years that you’re leasing compared to when you buy. And at the end of your lease term you have the option to buy out your lease if you want,” he said.
Leasing also enables you to try out a car for a period of time without committing to forever, which means you can see if it’s really right for you.
Additionally, this option offers protection in the following scenario, he said. “Let’s say the market tanks, and you have negative equity in your vehicle — meaning it is worth less than the money you still owe on it. You can turn it back in and go get something else. Again, the vehicle is no longer your problem.”
This strategy only works with a new vehicle, however, not a used one.
While having a safe and reliable vehicle is important at any stage of life, boomers have slightly different considerations and should never make a hasty decision about a vehicle.
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