Evaluating your finances
Take a careful look at your financial situation. You’re no longer in your income-earning years, so every penny counts. Planning for expenses outside your usual spending can help prevent you from severely depleting your retirement savings.
Start by figuring out your budget for a vehicle purchase. You can do this by reviewing your monthly retirement income and allocating a percentage towards a vehicle.
If your car budget isn’t as high as you’d like it to be, purchasing a used vehicle could save you money.
Don’t forget to estimate the trade-in value of your current car — it could help bring down the overall cost.
It’s possible to finance a vehicle after retirement, but you’ll need to factor in interest charges and any additional lender fees. These extra costs can eat into your retirement budget, so the monthly payment must be one you can easily afford.
Shopping around with different lenders is a smart way to find the best rate and loan terms based on your financial profile. Checking your credit score ahead of time can also give you an idea of which lenders are more likely to approve you.
Paying for a car in full upfront can save you money on interest. If you choose this route, consider whether you’re comfortable withdrawing a lump sum from your retirement accounts. Alternatively, you could set up a sinking fund — setting aside a chunk of your retirement income in a separate savings account until you have enough to make the purchase.
Remember to factor in ongoing costs beyond the purchase price or loan payments, such as car insurance, maintenance, and fuel.
Owning a different vehicle may result in higher car insurance premiums, so be prepared for potential increases. Fuel costs might also rise if your new car isn’t as fuel-efficient as your old one.
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Learn moreChoosing the right vehicle for your needs
Reliability is one of the most important factors when choosing a car. Look for a vehicle that offers the safety features you want, one that’s low maintenance and fuel-efficient. Spending less on fuel and repairs will help lower your ongoing expenditures.
Resources like Consumer Reports offer reliability ratings can give you insight into how well certain makes and models hold up over time. You can also ask trusted friends and family members for their recommendations.
In addition to financial considerations, think about your lifestyle. If you need a reliable car for running errands and visiting family, you may not need all the latest bells and whistles.
However, if you plan to be more active — going camping or taking long-distance trips — you may want to consider features that improve your safety on the road. These can include backup cameras, blind spot detectors and cross-traffic alerts.
Whatever you plan to use your car for, make sure you feel comfortable driving it and know how to use its features. A high-end infotainment system might sound nice for long trips, but if it’s challenging to use, it could end up being more frustrating than helpful.
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