Buying a Car on a Tight Budget

Medical Center

Perhaps you’ve come to the point in your training where you need to travel to distant locations at odd hours, and you’ve decided you really need a car. No one type of car or car-acquiring experience is right for everyone, but I’ll try to walk you through some of the major decisions you may be faced with if you’re on a tight budget.

Buy or Lease?

Advertising makes leasing look like a great option up front — a couple of thousand bucks down and a couple of hundred bucks per month, and a brand new car, right? While this may be a good option for some people, be sure to read the fine print carefully before deciding that this is right for you.

 Specifically, there are fees for driving more than a certain number of miles, fees for repairs or upkeep many might consider normal wear at the end of a term, and generally, only a small minority of the vehicles on the lot qualify for the amazing deal that brought you there in the first place.

If you find the right deal for you, by all means go ahead, but the rest of this article will focus on buying rather than leasing a car.

Do I really save that much money buying used rather than new?

According to, the average depreciation in true market value of a car the moment it is driven off the lot is 11%, depreciating another 15%-25% for each of the next five years. This means that by five years out, a new car is worth roughly 40% of what was paid for it initially.  That said, dealers want to sell new cars, and to incentivize this, they will gladly loan money at a much lower interest rate (often 0% to 2%) than one can obtain at a bank or credit union.

If you search carefully, you should be able to find a car within the last few model years that functions as well as and looks nearly as modern as a brand-new one, for roughly half the price. This is, unfortunately, still a sticker price somewhere between $10,000 and $15,000, which most students don’t just have tucked between the couch cushions.

So while buying a new car will definitely be a larger investment in the long run, certain promotions may set it at a comparable initial cost, with a lower risk of malfunction due to its misuse by a previous owner.

In my opinion, all these points are moot for students funding a car themselves, and I’d recommend looking for a somewhat older vehicle.

Will a much older car be safe and reliable?

One distinct advantage of buying older cars is that reliability data have been kept and are easily accessed on and similar sites. Look for cars that meet your stylistic and functional needs, have a good history of reliability, and for which parts would be easy to come by should the need arise.

Try to buy from someone who is either the original owner of the car or has owned it for a long enough time to give you a reliable history of service. I also think it’s fair to ask why someone is selling the car.

Favorable answers include upgrading to a new one or moving to a place where it doesn’t make sense to take the car. Unfavorable answers include anything that suggests they are short on money, as this makes them less likely to have been investing to keep the car up in the recent past.

From a safety perspective, all cars within the last 15 or so model years have second-generation or better airbags and are designed to protect you in the event of an accident. As cars today are designed for the car itself to crumple to protect the passengers, I’d recommend not buying a car that has been involved in a major accident.

If a car has ever been severely damaged or deemed a total loss by an insurance company that paid a claim on it, the car receives a salvage title. If you’re a car expert, you can judge for yourself whether the car is in appropriate condition, but if you’re a lay person, I’d recommend steering clear of cars with salvage titles.

If a car has been regularly maintained, there are relatively few major things that need replacement in the first 100K miles, and little things tend to creep in between 100K and 150K. Beyond 150K, a car isn’t doomed by any means, but the cost of repairs often gets close to the value of the entire car. If I were to recommend a sweet spot in the purchase of an older car, it would be between 7 and 12 years old, with between 50,000 and 110,000 miles on it.

What should I expect for maintenance?

Before buying a used car, it’s a good idea to have it checked out by a mechanic. People have Yelped extensively about various auto garages, so find one where the mechanics explain their findings and recommendations before just saying, “You need “x, y, and z.

Most auto garages will give a car a pre-buying inspection for less than $100, and most sellers are willing to take their cars to a mechanic as long as it is not too far away. If they’re uncomfortable doing so, it may be a red flag that something is wrong with the car, the person or both.

In general, several things need regular upkeep — oil and other fluids, filters, tires and alignment, brakes and belts, to name a few. These are not trivial, as your safety often depends on their proper function.

On top of that, an older car will often have little things go wrong — like switches, levers, hoses and interiors wearing out. All in all, you should expect to spend no less than several hundred dollars per year on maintenance and minor repairs.

Add onto this the cost of registering the car, smog certification and insurance, and you’re looking at a couple of thousand dollars per year even before you back into a pole after your all-night shift or put fuel into it. This should make you think harder about how expensive a car you can actually afford.

OK, let’s talk about fuel economy

Because people are directly faced with the cost of fuel every time they fill up, it has become very popular to have a car with good gas mileage. Of course, we all want to minimize our carbon footprint, but the popularity of high miles per gallon cars has kept prices on such vehicles much higher than that of cars with only moderate fuel economy.

The difference in fuel cost in a 10,000-mile year between a car that gets 20 mpg and one that gets 35 mpg is less than $1,000, which means that if you get a really low price on a car that you plan to keep for only a short while, spending a little more at the pump every few weeks may still be in your favor overall. Down the road though, it will be easier to sell the car with better fuel economy, so the right choice depends on your long-term plans.

Where do I even look for a car?

There used to be lots of different places worth looking, but in the Bay Area today, the answer is overwhelmingly Craig’s List. Both dealers and private parties post on this site, and you can narrow your search by price, seller-type (dealer vs. owner), location and any other search term you might fancy.

In general, you should know that dealers are able to sell cars for much higher prices than private parties, so if you find a car you really like through a private party, it’s OK if you spend a few hundred dollars more than “private party Blue Book value,” which you can find online through the Kelley Blue Book at, as this will still be significantly less expensive than buying from a dealer.

Don’t hesitate to visit a few dealerships to look through their used car inventory, to get some first-hand experience of several different cars you might want to buy.

What about price and bargaining?

In general, all things are fair game in the negotiation process. This includes prices, options, add-ons, interest rates of loans (from dealers) and whatever else you can think of. Do whatever is comfortable for you, and remember that this person needs to sell the car as much as you need to buy it.

You can use the tactic of walking away from the negotiation table strategically at times, but be prepared to actually have to walk away if someone calls your bluff. With a bit of hard work, you should expect a reliable car for between $3,000 and $8,000, and don’t forget to have a bit of fun along the way. Happy car hunting!