New vs. Used
One of the most important decisions when shopping for a car is whether or not to buy a new or used car. A new car will typically be more expensive than a used one, but as we've all heard before, “you get what you pay for.” Almost all new cars come with a warranty and many of your potential issues covered while the car is under warranty won't cost you anything.
A used car is less expensive off the lot, will cost money less money to insure, and, according to Nerd Wallet, will depreciate at a slower rate over time than a new car . However, owning a used car without warranty means you will have to pay for repairs to your car.
While the 10-year-old luxury car may be more seductive than the comparably priced 4-year-old economy car, you could end up paying out the nose for expensive repairs on a luxury car. Thoroughly research your choices. This should give you an idea of what you will pay in yearly maintenance, and if spending more for a new car makes sense.
Lease vs. Buy
Another decision that comes up is whether to lease or buy a new car. Purchasing a car will require more money up front, the monthly payment will be higher than leasing the exact same car, but the car is yours. If you plan on having this car for a long time, or maybe want to hang onto it and give it to one of your children, buying is the way to go.
When you lease a car, your monthly payment is determined by the amount your car will depreciate over the span of your lease. Leasing costs less money up front, has lower monthly payments, and allows you to drive a more expensive car. These are nice features, but you don't actually own the car. Leases tend to have mileage limits (ex. 10,000-12,000 miles per year.). Driving over these limits will typically result in being charged by the dollar.
Consider how well you maintain your cars. At the end of your lease, you will be charged for any damage to the car, even if it seems miniscule. It's difficult to know exactly how much every little nick or ding costs, and the fees can add up quickly.
You are legally obligated to carry car insurance, but there are various tiers of insurance that cover a variety of incidents (as explained by the Wall Street Journal ):
- Liability: covers expenses when you are at fault in an accident
- Bodily Injury Liability: covers medical expenses of people injured in a crash that is your fault. coverage for everyone's injuries respectively
- Property Damage Liability: pays damages done to the other car if you're at fault in an accident
- Personal Protection Injury: provides coverage for you and your passengers in an accident
- Uninsured Motorist Coverage: helps cover costs if you are hit by a poorly or uninsured drive
- Collision: provides money to repair your car
- Comprehensive: covers any costs if your car is stolen or damaged in an accident
The amount of coverage you are required to carry by law varies on a state to state basis. Just like any other type of insurance, you won't appreciate paying it until (knock on wood) you actually need it. Just like car shopping, do your homework when searching for an insurance policy. Getting in an accident is not fun, but having the right coverage keeps the situation from going from bad to worse.
 Comparing the Costs: Buying a New Car vs. Used, NerdWallet
 How Much Car Insurance Do You Need?, The Wall Street Journal