Individuals spend a great deal of money on trucks and vehicles. In actuality, transportation expenses, including gasoline and car payments, account for around 16% of the average American household’s entire budget. This places it above of incidentals like food, education, and retirement savings, but ahead of housing as the second-biggest expense.

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The cost of the purchase might be daunting, particularly for younger, first-time purchasers who often have less saved up and less established credit histories.

As of the end of 2021, the average price of a new automobile, including sedans, crossovers, vans, pickup trucks, and SUVs, was over $47,000, up over 25% in only two years, according to Kelley Blue Book. The average price of a used car increased even more sharply, rising from about $20,000 at the end of 2019 to over $28,000 two years later, a 42% increase. Over the same time span, these price increases outpace general inflation. They are the result of a pandemic-related industrial slowdown, heightened consumer demand, and a worldwide scarcity of microchips.

So, in today’s market, how should one go about purchasing their first car?

Where to begin the process of purchasing an automobile

The first thing a prospective buyer should do is figure out what kind of car they need and what their budget is.

Making a choice requires careful consideration. For a single individual or couple, a tiny sports vehicle could be suitable, but not if they intend to have a family. While a big SUV could be fantastic for road trips and camping with friends, it probably won’t be very enjoyable to fill up the tank, pay for insurance, or locate street parking.

Senior consumer advisory editor and content strategist at Edmunds Ronald Montoya said, “Think about your actual needs, how long your commute is, how much you have to carry, and if you actually enjoy driving and might want something sporty.” “Avoid overspending; you can probably get by with a smaller car for the majority of your needs. Only rent a larger car once or twice a year, for emergencies.”

Because costs are so high, consumers must also pay special attention to their spending plan. “If it turns out you can’t afford it, there’s no point in test driving a car,” stated Tom McParland, who writes for Jalopnik on consumer issues and the automotive business and operates the vehicle-buying firm Automatch Consulting.

The majority of experts suggest that the total amount spent on a car, including payments, insurance, gasoline, and electricity, should not exceed 20% of take-home income. Many internet calculators are available to assist buyers in figuring out how much they can afford to pay for a car.

Selecting the kind of car to purchase

Nowadays, over half of automobile buyers select crossovers, which are tall cars based on passenger cars with an open rear section (like an SUV or station wagon) as opposed to an enclosed trunk. Crossovers combine some of the off-road and bad-weather capabilities of a four-wheel drive SUV with the majority of the efficiency and driving qualities of a typical automobile.

A conventional automobile could be a better option, though, if you don’t frequently drive in heavy snow and don’t require a higher driving position. Cars, whether station wagons, sedans, coupes, or convertibles, often weigh less and have a lower center of gravity than crossovers, which improves handling and economy.

On the other hand, a person who frequently tows or drives on badly maintained dirt roads could prefer a conventional SUV or pickup because they are typically made on heavy-duty truck chassis that can withstand such damage. Even while the majority of SUVs and trucks burn a lot of petrol, there are a few fuel-efficient models available, such the 2017 Ford Maverick’s hybrid model and the Ram 1500 and Chevrolet Tahoe’s diesel variants. Furthermore, during the course of the following year, a number of electric options—including the Ford F-150 Lightning pickup—will be available on the market.

Remember that minivans are still in production if you don’t tow or drive off-road frequently but you do transport a lot of people or things. Larger families will find this sometimes disregarded market category excellent, since there are several front- and all-wheel-drive minivan alternatives that can comfortably seat up to eight people in a manner akin to a car.

Lastly, people considering purchasing an electric car may need to prepare for a drawn-out search. Although gasoline-powered cars still make up the bulk of vehicles sold, battery-powered mobility may be the way of the future. In the fourth quarter of 2021, electric vehicle sales accounted for just 3.4% of all vehicle sales, which is actually less than diesel sales (4.6%, largely trucks). Another 7.5% of cars were hybrids, which mix electric and gas engines. Though manufacturers are working to increase output of batteries, certain new buyers of electric vehicles are still eligible for $7,500 in federal tax credits in addition to state and municipal incentives.

When a buyer has a specific kind of car in mind, they should look for owner and expert evaluations (such as those found on Car and Driver, Jalopnik, and Edmunds) and go through them to see which specific models appeal to them. Then, they should schedule test drives.

Used or new?

Purchasing a well-maintained, low-mileage used car that was no more than two or three years old was, for the most part, the prudent financial choice. While these might not have the newest entertainment system or a complete manufacturer guarantee, they usually offered dependable transportation at a significant savings because cars would normally depreciate by 10% every year for a few years after the initial year.

However, depreciation has been tempered by the Covid epidemic, and used car values are rising more quickly than those of new automobiles. Purchasing a new car gets more alluring when the price difference closes since the cars are in better shape, come with a complete guarantee, and have cheaper financing rates.

Due to rising gas costs and increased interest in electric vehicles (EVs) and the benefits of charging rather than filling up, used Teslas have been very successful recently. The average price of these well-liked all-electric cars on the secondhand market is currently $65,000, which is almost what they originally cost.

Customers would be better off shopping about because it doesn’t make sense to spend nearly as much for a used item as it would for a new one.

Additionally, buyers of used cars should think about locating a certified pre-owned car, which is something that most manufactures only sell through accredited dealers. CPO cars are often low-mileage and recently manufactured. They undergo a comprehensive cleaning and inspection process, followed by any required repairs. In addition to the remaining portions of the original coverage, they provide a guarantee supported by the manufacturer, and some even contain other benefits like travel insurance or roadside assistance. Although CPO autos are more expensive than comparable used cars, they can offer piece of mind.