Purchasing Car in US as International Student | Financing, Used Cars & Hidden Fees

Summary

In this video, the host offers a comprehensive guide to purchasing a first car, addressing key considerations such as timing, new vs. used cars, SUV vs. sedan, and preferred manufacturers. They discuss financing options, comparing buying vs. leasing, and highlight the importance of credit history for securing favorable loan terms. The video also covers hidden costs like title fees, insurance, and maintenance, emphasizing the need to distinguish between a car as a necessity versus a luxury.

Takeaways

• 🚗 Understanding when and why you need a car, especially for internships or jobs where commuting is necessary.
• 🔄 Comparing the benefits of buying a new car versus a used car, with the speaker favoring used cars due to lower cost and depreciation benefits.
• 🚙 Deciding between an SUV or a sedan based on personal needs, such as weather conditions or storage capacity.
• 🏪 Exploring different places to buy a car, including dealerships, CarMax, rental companies, and local dealers, while cautioning against Carvana.
• 🇯🇵 Highlighting the preference for reliable brands like Honda and Toyota, especially for long-term value and low maintenance costs.
• 💳 Emphasizing the importance of building a credit history to secure better financing rates when purchasing a car.
• 📉 Discussing car financing options, including loans, credit unions, and the potential to refinance for better rates later.
• 📊 Weighing the pros and cons of buying versus leasing a car, especially considering mileage limits and equity-building.
• 💸 Outlining the hidden costs of owning a car, such as insurance, title fees, registration, maintenance, and gas expenses.
• ❓ Encouraging buyers to assess whether purchasing a car is a need or a want, advising against expensive purchases without solid financial backing.

Q & A

Why is it important to analyze whether you need or want a car before purchasing?

It's important to determine whether buying a car is a need or a want to avoid unnecessary financial strain. Many people, especially students, buy expensive cars like Audis or Teslas without considering if they truly need them, leading to struggles with payments. Prioritizing needs can help avoid such difficulties.

What factors should students consider when deciding to buy a car?

Students should consider their commuting needs, the cost of buying versus using Uber, whether they know how to drive, and if it's more practical to buy a car during an internship or full-time job. A cost-benefit analysis of car ownership vs. ridesharing is crucial.

What is the speaker's recommendation for buying a new car versus a used car?

The speaker recommends buying a used car, especially for first-time buyers. Used cars have already depreciated, making them more affordable. For example, the speaker bought a used Toyota RAV4 for $10,000 less than a new model, with a similar driving experience.

Why is credit history important when financing a car?

Having a good credit history helps secure lower interest rates when financing a car. Without a credit history, you may face higher interest rates. The speaker advises getting a credit card early to build credit before needing to finance a car.

What are the pros and cons of buying an SUV versus a sedan?

SUVs are preferred for their cargo space and performance in snowy areas, but sedans work well even in snowy regions if roads are cleared. SUVs may be useful for those who need extra space or frequently transport goods, while sedans offer lower costs and similar functionality.

Where does the speaker recommend buying a car from?

The speaker recommends buying from local dealerships or websites like CarMax rather than Carvana. CarMax offers a more reliable purchasing experience compared to Carvana, which may have issues with the car or its return policy. Additionally, rental companies like Hertz and Enterprise sell cars at reasonable prices.

Why do many Asian buyers prefer brands like Honda and Toyota?

Asian buyers prefer Honda and Toyota because these brands hold their value well and are reliable for long-term use. They also have affordable maintenance costs, making them ideal for practical buyers. Toyota’s luxury brand is Lexus, and Honda’s is Acura.

What is the benefit of refinancing a car loan in the U.S.?

Refinancing a car loan can reduce the interest rate, especially after building credit history. For example, the speaker's initial loan had a 5.6% interest rate, which was later refinanced to 2.2%. Refinancing can save money over the long term.

What are the advantages and disadvantages of leasing a car?

Leasing a car may be advantageous for those who want an expensive vehicle with lower monthly payments, but it comes with mileage limits and no ownership equity. Buying allows for building equity and avoids extra costs for mileage overages, making it better for frequent drivers.

What hidden costs should buyers be aware of when purchasing a car?

Hidden costs include title fees, registration fees (which vary by state), insurance, and maintenance. Additionally, services like oil changes and car washes can add up. Buyers should factor in these ongoing expenses when calculating the total cost of car ownership.