3 min read
If you've been thinking and dreaming about buying a luxury car, then look no further. I'm about to put all of you on game and teach you how to buy a luxury car.
But wait! Anthony, aren't you always telling us NOT to buy new cars?
Yes! I don't want you to waste your money on a new car, because new cars lose their value super fast. A new car depreciates by 20% each year, according to Ramsey Solutions. That means if you bought a $60,000 luxury car, it’s only worth $48,000 after one year of driving it!
So, why am I writing about buying a luxury car then? Well, if you follow what I teach, there will come a point in your financial journey when you'll reach financial freedom and you should be able to treat yourself to your dream car if that's what you want.
Listen, you guys, there’s nothing wrong with having a nice car, but I want you to do it right. So, I’m giving you the steps to buy a nice luxury car the right way. Let’s get started!
Step 1: Get out of debt
This is a tough step, but you’ll enjoy your car more without debt. To get out of debt, here's what I want you to do:
- Live on less than you make.
You can temporarily cut out non-essential expenses to free up cash. For example, you can go without cable or reduce your cellphone data plan. You can also reduce your restaurant and entertainment budget or postpone new name-brand clothes and other items for a year. These can make a big difference in quickly paying off your debts, so you can afford that luxury car in the future.
- Take a second job or find a way to earn a second income.
If you do not have extra cash in your budget, be creative to bring in some extra money. Here are some ideas:
- Rent out a room in your house.
- Selling items online, like tools, old musical equipment, jewelry or workout equipment.
- Take second jobs like housesitting or pet sit.
- Be an Uber driver or take on a delivery job when you’re free.
All these options will help you to get out of debt, so you can save your money, achieve financial freedom and pay for your luxury car in cash (because we don't do car payments around here).
Step 2: Set aside your 3-6 months emergency fund
Luxury cars are expensive to maintain, and you need to set aside an emergency fund in a separate account from your checking account to ensure you're covered. Since unexpected repairs can be expensive, they can put a real strain on your finances. Make sure you have enough in your savings and the right insurance in place to cover your luxury car in case something happens to it.
Step 3: Buy a used luxury car, not new
Most cars lose a ton of value right after you drive off the lot. Now, some luxury cars are amazing at holding their value, but not all. That's why I suggest going for a used luxury vehicle if you want to save.
According to Edmunds data, a new car will have its highest depreciation in its first few years. In an example given by Edmunds True Cost to Own the new Accord and the used 328i, the Honda will depreciate by about $4,773 in its first year, while the BMW will depreciate by about $2,903. Buy used, and let the original owner take that financial hit.
When you buy a used vehicle, it is much cheaper from a private seller. You can find used luxury vehicles on private seller sites like Craigslist and even at a luxury car dealership.
And just because it's used, doesn't mean it's a lemon. You can find a quality preowned luxury sedan or cars of all kinds that are in great shape with low mileage. Personally, that's how I bought my luxury car, and I love it.
Step 4: Set your luxury car budget. What can you afford?
No car is worth your financial freedom. That's why I want you to think long and hard about what kind of luxury car you can realistically afford, and that includes maintenance costs.
- Don’t live outside of your means.
When researching luxury cars, you will find that the prices of luxury vehicles will vary drastically. The new luxury vehicle costs will range from $30,000 to more than $200,000. Therefore, while researching, take a realistic look at your finances and don't dedicate more of your take-home pay to your car than you can afford.
2. Check Kelly Blue Book for your research.
Kelly Blue Book is a great resource for comparing prices and finding the best deals on luxury sedans, sports cars and more. You can find online reviews and compare features to help you decide what the perfect luxury car will be for your needs. You can also consult an affordability calculator to help you realize your budget. You can get the affordability calculator on Edmunds.com.
3. Create a list of your wants and needs.
There is a wide range of features when it comes to luxury vehicles. You should know what you are looking for. You may be in search of comfort, size, or speed so make a list of your priorities. In your list, make a category starting with the things you need and ending with what you want. Your list can include:
- Special interior accessories
- Up-to-date technology
- A custom paint job
- Extra space and comfort
Also, research the type of luxury vehicle you want and decide between a sedan, an SUV, and a sports car. Always refer to your list when deciding between these three luxury vehicle categories. Select the category that best matches your list of wants and needs and make a decision. For example:
- Luxury sedans are the most practical, balanced choice of the three. This vehicle is practically sized and allows you to save money on other accessories.
- Luxury SUVs will give you size if it is on your list. The SUV has extra space but comes with a higher price.
- A luxury sports car is speed-oriented due to its specialty engine but will come at a higher price.
Step 5: Be realistic. Look for a luxury car that fits your lifestyle
Your luxury car should be practical for your lifestyle. Some good questions to ask yourself are:
- Does it have good gas mileage? If you have a long commute, go for a fuel-efficient car like a hybrid or electric car. If you are a frequent driver in the city, a smaller car will be a better option for you.
- Is it spacious enough for your family? You need a car with enough seats, especially if you have kids and space for luggage, grocery shopping and more.
- Find out if it's affordable to maintain. You can find a car that appeals to your aesthetic senses and fits your needs and budget.
- Check the VIN for the full vehicle history if purchasing a used luxury car. Also, check the CARFAX on the vehicle using the VIN number. This is a vehicle history report that should be provided for free by the dealer. You can get one if buying from a private seller.
- It’s also crucial to consider how you will use your car. For example, if you are an avid road-tripper, you should consider something comfortable for long drives. If you stay in a snowy area, you need a car with good traction and 4-wheel drive. Moreover, if you frequently transport large items or gear, you should consider getting a luxury truck or SUV.
Step 6: Research reputable luxury car dealers and ask the right questions
These are questions to ask the seller or at the dealership.
- What’s the mileage on the car?
Along with the model number, you should ask about the total distance that the car has covered. This is not difficult to see. Just check the mileage on the car's dashboard to read the mileage number. This'll also give you an idea of the state of the car.
- Why are they selling the car?
For private sellers, this is a good question to ask. Also, find out if there have been any other owners before them when they bought the luxury car.
- Was it salvaged? (If yes, walk away.)
This is because it will likely have many future maintenance challenges.
- Are there any major repairs needed?
Request this information so you can know what to expect if you decide to buy that vehicle. Car dealerships will likely have mechanics to help keep your luxury ride in top shape. Such dealerships have body kits and accessories that you might not be able to get when going for a private dealer.
- Is there any information that wasn’t in the ad?
Feel free to ask as many questions as you need from the seller. They should be willing to answer and make you feel assured of the vehicle.
6. Can you take it for a test drive?
Request for a test drive in the vehicle. Doing this in a public space and with one other person is super important, especially if you are buying from a private seller you do not know.
7. Can you pay with cash?
This is the preferred way to buy your luxury car. Most sellers would welcome this and might give you a discount for paying it in full at once. So make sure to negotiate the price, especially when you have a cash payment.
Bonus tips on what to do when buying a luxury vehicle
Here are some important things to keep in mind in your luxury car buying journey:
1. Do an inspection to check for scratches, dents, etc. and negotiate a lower price if you find something.
2. Stick to your budget and don’t get carried away. Remember, you can't spend any more cash than what you have.
3. Be willing to walk away from the car if you and the seller don’t agree on the fundamentals.
4. Be patient while looking for the right car. Just like the process of looking for a house takes time, so does look for the right luxury car. Don’t rush and believe me, you will find it.
You may not be ready to buy a luxury car yet, but I want you to start dreaming about it anyway. Think of it as your reward for doing the right things with your money.
Take these steps and tips with you throughout your buying journey. If you do, I'm 100% confident that you'll find your luxury dream car with ease.