Choosing Your Vehicle

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Finding the right car isn’t hard if you go about it the right way, but you should have a plan when you begin the car-buying journey. Factors like lifestyle, budget, new vs used, manufacturers and models, as well as cost, all have to be balanced against each other as you narrow your search. There will be trade-offs for sure because we can’t always get what we want, but if you are disciplined and thoughtful, you’ll get what you need. These are what we tell our members are the essential steps to understanding their options:

Match Your Car To Your Lifestyle

Many buyers assume they know what they want in a car, but really analyzing what you need and how you’ll use the car is the first and most important step in the selection process. Ask yourself these questions:

How many people will use the car on a regular basis ? – if you have a family you’re going to need a different car than you will if you’re single. It makes sense right? A two-door car or pickup just won’t work if you have a family, and you probably don’t need a giant SUV if you’re the only passenger most of the time.


What is the car going to be used for most of the time? – what you do with the car is the second big factor. If you use it for work, carrying tools or materials, a sedan’s just not going to work. In the same way, if you use the car to commute to work, do you really need a gas-guzzling pick-up truck? You might want one, but you have to be practical and match the car against how it will be used on a daily basis when you make your choice.

What features do you really need? – some buyers want all the bells and whistles they can get when they shop for cars, but you have to ask yourself what you really need, versus what you want. A lot of ‘nice to haves’ aren’t ‘need to have’ features when you really think about it, so you should make a shortlist of the things the car really needs to have and start from there. If you find the car of your choice for the price you want and it has those features too, great, but you should focus your search on the cars that have what you really need. It will cost you less in the end. 

Do Your Research 

Once you understand the type of vehicle you are looking for, the next step is to compare vehicles from the manufacturer(s) who make them. Whether its an SUV, sedan, pick-up and/or crossover car you can count on nearly every manufacturer making cars in most if not all of these categories.  While you may have a preference for a manufacturer based on past cars you’ve owned or recommendations from friends or family, you should do your homework and research the makes and models from every manufacturer before you make your choice.  

Even if you have your heart set on specific make or model you should read the reviews and when you go to check them out in person you should always test drive cars in the same class from multiple manufacturers before you make a final choice. 

Use major review sites to do your research. Lots of people get their reviews from their friends or family and they shouldn’t. The people who work for car magazines like Car& Driver or sites like Edmunds are professionals. They look for and find things that you don’t even know about. Some publications like JD Power also review cars after 40,000 miles and write reviews based on the cars after they’ve been driven for 3-4 years. These articles typically have information about maintenance costs etc which is critical if you decide you’re going to buy a used car. 

It may seem obvious, but as you do your research you should make a list of the key features you want, sometimes you don’t even know about features that become important in the long run, and use that list to check off which manufacturers vehicles have what you want. In most of the big auto research sites, you’ll find side by side comparisons of vehicles in the same class like SUVs and information on the features each vehicle has.

Once you decide the make(s) and models you think you are interested in you should take a test drive in a brand new vehicle from each manufacturer. Why? Well, driving a new one will give you something to refer to if you decide to buy a late model used or Certified Pre-owned car. If you understand what the brand new version drives and feels like, you’ll have a better sense of what gets old faster in a used car. Oh and don’t be afraid. Just tell the salesperson you’re testing each manufacturer’s vehicles against make/models you are looking at. They’ll jump at the opportunity to show you the car, trust us. Obviously, if you’re in the market for a new car you’d do this anyway. 

Figure Out What You Can Afford

We’ll go into this in much more detail in the financing section but the next step is to come to terms with understanding what you can afford to pay for the vehicle you want. There are two rules you have to follow:

Manage the Cost/Earnings Ratio and Loan Term  – As we said in the previous section the data shows pretty convincingly that for most people affording a car comes down to a simple ratio – You shouldn’t buy a used car that costs more than 25% of what you make in a year and never sign a used car loan that lasts more than 36 months if you can avoid it. If you are buying a new car you can push these numbers to 30% and 48 months, given the lower maintenance. In the same way, if you buy an extended warranty, you can afford to pay a higher percentage and sign up for a longer loan.

In practical terms this means that if you make $50,000, buy a car that costs $12,500, if you make $20,000 buy a car that costs $5000, you get the point. This calculation should include fees you’ll have to pay to get the car registered, taxes and so on that can add up to 10%+ to the total. You may be able to bargain with the dealer to absorb some of these, but you should assume in your budgeting that you will pay that 10% extra. 

You should also do everything you can to make sure that your loan is for 36 months or less. Because most buyers are focused on the monthly payment not the length of the loan, dealers will work to adjust the loan term to make the payments work. In practical terms, this means that if you’re trying to buy a vehicle that’s out of your range, the dealer will try to arrange financing for a longer term to keep the payments low. This is a clear sign that you probably can’t afford the vehicle and you should look for something cheaper.

The bottom line is that if you stick to the cost/earnings ratio and keep the loan to 36 months or less, you’ll avoid a lot of the problems that cause people to get in trouble when then buy a vehicle.

Find Vehicles In Your Budget Range – The most important thing you need to do, once you’ve chosen the type of car and the manufacturer you want is to find out what you can get that fits your budget. The easiest way to do this is to use pricing sites like Kelley Blue Book ( which is the oldest and most comprehensive site to get current market prices of both new and used cars based on local prices recorded in actual sales. We’ll go into the intricacies of new car pricing later, but for now, you can use the site to get ballpark numbers for new cars and specific pricing for used cars.

The site is straightforward. Using the 25% ratio to calculate the amount you can spend, select the car type and configuration you want to look at and start by looking at cars that are 5 years old (you’ll see the new car pricing first on the make/model page so if that’s what you’re looking for you can stop there). If you are buying a used car KBB will show you the “Fair Market Range” and estimated cost in your market (KBB will ask you to enter your zip code). If the cost is too high, look at cars that are 10 years old. Based on the 5-10 year range you should be able to zero in on the year that matches your budget fairly easily. KKB’s prices reflect average cars in good condition with average miles for that year, so you’ll need to compare pricing and mileage in the real world when you start your search. Once you are finished with this part of the process you’ll know how much the vehicle you want should cost in your market which will be the basis for negotiating with dealers when you do go shopping for a vehicle.

Understand The Cost of Ownership – The last thing to understand when you are calculating what you can spend is what’s called ‘cost of ownership. Most people who buy a car have no real understanding of the real cost of ownership which if you made a simple equation would look something like this Cost of Ownership = Monthly Payment +Insurance +Maintenance+Gas. It may surprise you, but the typical cost of ownership for a $20,000 car will be somewhere in the range of $600-$800 per month all in. While you may be able to save on some of these costs, you absolutely have to be realistic about what the real cost is.


New, Used, CPO and Leasing

The choice between new, used, certified or leased cars is more complicated today than it was in the past for a variety of reasons. To make it easier to understand we’ve boiled the key factors you have to consider when you make your choice:

New cars are, well, New – If you qualify for low financing rates, have your heart set la particular make/model color with all the bells and whistles you can’t beat a new car. You can get exactly what you want if you are willing to wait and most of the time you’ll get the same price as a similar model on the salesroom floor. 

The downside of new cars is that they lose value quickly when you drive off the lot. Here’s a quote from CarFax a leading player in pricing cars. According to CarFax the value of a new car can drop by more than 20 percent after the first 12 months of ownership. Then, for the next four years, you can expect your car to lose roughly 10 percent of its value annually. As you can see that’s a pretty dramatic set of numbers. The upside is that today’s new cars are really well built and most of them will last a long time. This means that if you take care of the car it will go a long way. While new cars depreciate quickly as we noted above, they also reach a floor after 3-4 years where their value stays stable for another 3-5 more years if the car is well maintained. What this means in practical terms is when you pay off the loan you’ll have a car that’s worth something when you go to buy your next one.

If you decide to buy a new car you have to be pretty cautious about the financing. As we mentioned in an earlier section many manufacturers and dealers are moving to longer loan periods in an effort to keep the cars affordable, which in practical terms translates into the size of the monthly payment and down payment. If you do the math which we will in the financing section the length of the loan can have a big impact on how much you pay in interests over the years.. 

Used cars are good cars – cars are better made now than they used to be and as a result, used cars that have been maintained are as good in many respects as new cars. They hold their value far better because all of the value loss associated with new cars has already happened. This also means that in many cases they are more expensive, but that’s typically offset by the fact that they’ll last a lot longer.

At the NHAA we’re big fans of used cars, because we think they represent the best value per dollar, particularly for buyers on limited budgets. They are dependable, cheaper to insure and have already gone through the new car depreciation cycle we covered in the new car section.

You have to be more careful buying used cars, and you should make the dealer let you take the car to a mechanic or provide you with a certified inspection. You also have to think carefully about warranty programs that many dealers will try to sell you. There are pros and cons as you will see in the next section, but in many cases it makes sense to buy a warranty providing you get a good deal. 

Finally, many states have Lemon Laws and/or strong consumer protections for used car buyers. Check out the consumer protection section on the NHAA site which list the protections available in every state.

Certified Pre Owned cars reduce risk but increase cost– for some buyers certified pre-owned used cars make sense. They are usually low mileage off lease cars or cars that rental companies have sold to dealers auction. In either case they have been well maintained and come with multi-point inspections and warranties that are serviced by the dealer. To be clear, you pay more for a certified used car and you need to look at the warranty carefully to make sure what it covers. We discuss warranties in the next section. 

Leasing’s cheap, but there are lots of gotchas – leasing cars has become a more attractive option for car buyers over the last 10 years as monthly payments have risen and manufacturers have looked for new ways to move new cars. The key things to understand about leasing boil down to this: 

  • There’s usually a pretty hefty deposit at the beginning 
  • Mileage is limited – typically 10,000 to 15,000 miles per year
  • You have to take really good care of the car
  • You have to have good credit

As long as you understand these things and can comply leasing can make sense. Oh yeah and you get nothing back, you just basically rented the car, you never owned it. For more information about the ins and outs of car buying go to our Consumer Resources page.

So there you have it. Lots of ways to buy a car and lots of things to consider. The good news is if you follow the steps you’ll wind up knowing the make and model you want and you’ll know if you want a new or used vehicle or lease. Now its time to start looking for the car you want…