After decades of hard work, family ventures, and major life events, you’ve finally retired! Retirement means you’re now able to enjoy your free time, get some R&R, and start new hobbies to create a meaningful life. Many new retirees have big plans for their new life. To navigate through this new chapter, you’re going to need a new car that will allow you to enjoy the adventures you have planned down the road. However, many Americans entering retirement are unsure about the best way to go about buying a new car. To get you started, consider these tips for buying a new car in retirement!
Financing a New Car
Financing a new car is the most popular route to take when buying a new car for most Americans. Financing allows people to make monthly car payments over a period of time in order to afford their new car. Whether you want to buy a new Mercedes-Benz for your condo in Florida or search for a used car, financing is a viable option for buying a new car in retirement.
As a car owner, you’ll be able to take long cross-country road trips without having to worry about mileage limits that often come with leasing options, have an asset that can be sold, and put an end to monthly payments once you’ve completely financed your car. However, depending on your age, financing may not be the best option. If you’re planning on staying relatively local and will mostly use your car for everyday errands, other options may make more sense.
Leasing a New Car
If financing a new car doesn’t seem like the right option for you, leasing may be more attractive. Leasing a car often has lower monthly car payments and allows you to choose from the best car models without breaking the bank. Many retirees lean towards leasing a new car because newer models have more advanced safety features to assist them while driving, such as backup cameras, blind spot sensors, and additional features to keep them safe on the road. Lastly, it’s easier to walk away from a leased car than a car that was bought. For many people in retirement, they may find they no longer need a car or are unable to drive a car.
To get the most of your golden years, leasing your car can be the way to go. Most leases last around 3 years, which allows you to decide whether you want to renegotiate your lease for lower monthly payments, switch to a new car with more advanced features or look into transportation alternatives if you can no longer drive.
Save for a Sinking Fund
Another option to buying a new car for retirement is to simply plan ahead. If you know you’re going to be retiring in a few years and you need a new car, start saving! A sinking fund is when you build in the cost of expensive items such as a car purchase into your retirement plan so you can afford it once you’re done working. To begin, consider using budgeting apps that will help you set aside enough money per month so you can afford large costs. This way, you’ll be able to enjoy the warm rays from the Sunshine State or the desert winds of Arizona during those cold winter months on your next vacation.
In order to pay for your car upfront, take into account the current car you drive. Use a car depreciation calculator that will let you know how much your car is worth. Then, once you’ve saved enough money, do your research! Look at multiple dealerships, online websites, and cars for sale by owner. Paying upfront will rid you of monthly car payments and will give you an asset that can be added to your financial portfolio.
The Bottom Line
Many people think it’s impossible to buy a new car in retirement. However, this is far from true – if done correctly. In order to buy a new car once you’re done working, you need to plan accordingly. You can choose to finance, lease, or pay out of pocket. Each of these options come with their own benefits and disadvantages, so take time to sit down, make a plan, and drive away in the car of your dreams!