Don’t peel out of the lot with that new car just yet. Good things come to those who wait a year.

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When you feel like you can’t go one more minute driving the same boring car or truck, buying a new car or SUV may be all you think about. Suddenly, you see the model you want everywhere. And the driver always looks happier than you – because he or she has that new ride.

Rushing into a new car purchase can be a mistake, however. If you put off buying for a year and use that time wisely, you can save money and avoid problems down the road.

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1. Get a feel for affordability

Get a feel for affordability

You may be so caught up in the fantasy of how much a new car will improve your life that you fail to impartially evaluate whether you can afford the monthly car payment. The average new car monthly payment is $563, according to Lending Tree. Can you afford that?

To find out, take that amount or the amount of the expected monthly payment for the vehicle you want and deposit it into savings for a year instead of buying a new car now. That way, you’ll save a chunk of money while getting a good idea of how spending hundreds of extra dollars a month affects your budget.

Find out: 9 Questions to Ask Yourself Before Buying a New Car

2. Save a bigger down payment

Save a bigger down payment

The average cost of a 2022 midsize car is $25,000, and the average price for a midsize SUV is around $33,000, according to Kelley Blue Book. Waiting a year to purchase allows time to save a large down payment so you can finance a smaller amount. For instance, if you deposit $500 per month into savings for 12 months, you’ll have $6,000 to put towards a down payment.

A larger down payment can mean smaller monthly payments, too. For example, if you finance $25,000 at a 5.03% interest rate for 48 months, the monthly payment amount would be $576. With a $6,000 down payment and financing with the same terms on $19,000, your monthly payment would be significantly lower: $438.

3. Buy time to pay off other debt

Buy time to pay off other debt

Before you take on new debt, spend a year hammering away at credit card or other debt until it’s paid off. With that pesky debt out of the way, you’ll have fewer monthly payments to worry about on top of a new car payment. When emergencies come up, you’re also less likely to fall behind on payments.

When you pay down credit card debt without charging more, your credit utilization ratio – the ratio of debt to available credit – should lower, potentially raising your credit score for better financing terms.

4. Shop for the best financing

Rather than rush into whatever financing deal a new car dealership offers, spend the next year watching auto financing deals come and go. Find out whether your credit is good enough to snare an auto manufacturer’s advertised 0% interest rate or you need to improve your credit score before you buy.

Shop and compare banks and dealerships to learn what the likely interest rate and monthly payment on a new car will be based on your credit history.

5. Improve your credit score

Improve your credit score

Your credit score determines financing options, so generally the better your rating, the better the financing terms on an auto loan. If you have an excellent or a good credit score, you’ll typically have lower monthly payments and spend less overall than with a fair or poor credit score.

For example, if you have good credit that allows you to finance a new vehicle for $30,000 with a 3.99% APR for 60 months, your payment would be $552 and total interest over the life of the loan would be $3,120, according to Experian. On the same example, with poor credit – and a higher 15.99% APR as a result – your payment would be $729. And you’d pay a whopping $13,740 in interest over 60 months.

6. Do your research

Do your research

Don’t rush out and buy the first pretty SUV you see. That driver winding along a scenic highway in the TV  commercial may look euphoric now, but what about in six months? That could be when a model’s well-known (except to you) stalling engine or faulty electrical system decides to act up.

Check reviews on Kelley Blue Book, MotorTrend, Edmunds, and other online resources over the course of a year before you buy. While you’re at it, type in the vehicle model on a search engine along with “problem” and see what comes up.


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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

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