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Santiago Campbell
Santiago Campbell

Should You Buy A New Car Before You Retire

That is what planning is all about. Creating future income streams from your pension plans, 401(k), IRAs, investments, and Social Security and also estimating and projecting your future expenses is the basis of retirement planning. Since the future is difficult to predict, it makes sense to pick the more significant expenses a retiree has to make and either take care of them now before retirement or earmark funds to pay for them in retirement. In other words, pay for them now while you are still working.

should you buy a new car before you retire

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Your vehicles: Is your vehicle on the list of those expected to make it past 200,000 miles? If you own a Lexus LX, Porsche Boxster, Toyota Tundra, Ford Fusion Hybrid or Flex, or Honda CR-V, then your answer is yes. Regardless, a vehicle is a major expense to plan for before retiring. There are a couple of considerations. A new car carries with it higher insurance, taxes, and license fees, so if you are considering buying a new car, while you are working might be the best time to do so. There are fewer repairs with a new car, and you can often purchase a service package at a discount when you buy your vehicle. This helps to front-load your major expenses and control at least some of your future service expenses by prepaying them now.

The revolving door: According to a graph prepared by economist Tom Lawler and published on the Web site CalculatedRisk, the number of adult children living with their parents has exploded. A study published in the journal Transitions to Adulthood titled "What's Going on with Young People Today? The Long and Twisting Path to Adulthood" reports that parents are spending as much as 10% of their income to help support their young adult children. This is a reversal of the way things looked 100 years ago when young adults often supported their parents. This revolving door may not be something pre-retirees are anticipating.

If you had children later in life, you already realize that you may have college expenses around the same time you plan to retire, and hopefully you have already prepared for that. What you may not have anticipated was the need to temporarily support your adult children above and beyond their education. This is a bit more difficult to plan for, but it deserves some thought. If you have a child working in a challenging field such as the arts or an industry that may continue to be hard hit due to the economy, would funding a trade school or helping them complete an advanced degree help them get back on their feet? Ask yourself if your children are self-sufficient, and if not, consider when they will be and what steps they need to take to get there.

The question that we often see, is should you buy before or after retirement? Is my reduced income after retirement going to affect my chances of getting approved? Does it make more financial sense to buy before retirement to catch a lower rate and higher chance of being qualified, or is it better to wait to have a better understanding of what my monthly rate will be? The answer is not exactly black and white.

After your income has been reduced, can you still comfortably make the payments on the car of interest? You should already know the answer to this question, and lenders, whether you buy before or after retirement, will be looking for the same answer.

Therefore, if your credit is a bit on the rough side, or maybe you have a unique income situation, buying beforehand might be the right choice. If your credit is higher, and you have a comfortable pension coming your way with a healthy debt to income ratio, it may be more beneficial to hold onto your current vehicle for a little while longer, pay it down as much as you can, and purchase your new car after retirement.

Discounts! Lots and lots of discounts! As a retiree, you more than likely are eligible for at least one from each manufacturer. Most manufacturers have many different types of discounts available, you just have to know what to ask for.

The easiest way to know when to buy is to do a self-assessment. Thoroughly go over your expenses. Get a clear and solid understanding of where your finances stand, and know what they will look like before and after retirement.

Cars can be a big purchase, and you should think carefully about your car choice in terms of your overall financial picture. No matter when you need to buy a car, you should consider carefully whether to buy new or used.

The difference between thousands of dollars can be as important, or more important, than how much you save and spend every month. It may also be more important than how you invest your retirement savings.

Though you might feel like retirement is the best time to enjoy a new car, this may not be the most beneficial financial decision. Skipping the brand new car is a great way for retirees to eliminate an unnecessary monthly expense and free up some funds for what is really important to you. Just know what you need and prioritize. Use a retirement calculator to figure out what you really need.

Disclaimer: The content, calculators, and tools on are for informational and educational purposes only and are not investment advice. They apply financial concepts in a general manner and include hypotheticals based on information you provide. For retirement planning, you should consider other assets, income, and investments such as equity in a home or savings accounts in addition to your retirement savings in an IRA or qualified plan such as a 401(k). Among other things, NewRetirement provides you with a way to estimate your future retirement income needs and assess the impact of different scenarios on retirement income. NewRetirement Planner and PlannerPlus are tools that individuals can use on their own behalf to help think through their future plans, but should not be acted upon as a complete financial plan. We strongly recommend that you seek the advice of a financial services professional who has a fiduciary relationship with you before making any type of investment or significant financial decision. NewRetirement strives to keep its information and tools accurate and up to date. The information presented is based on objective analysis, but it may not be the same that you find on a particular financial institution, service provider or specific product's site. All content, tools, financial products, calculations, estimates, forecasts, comparison shopping products and services are presented without warranty.

Do you think you should buy a new car before you retire? Please feel free to comment below! And before you go, please take a moment to subscribe to our newsletter, and like us on Facebook!

Thanks for your insight. Safety features with bells and whistles are a definite consideration when making an investment in a vehicle, whether new or used. And I agree that worrying about repairs is a problem that we all need to consider. Dependability is essential. Happy to hear that you will not delay your retirement due to a car note. My point is to retire with what you value but without the peer pressure of purchasing needless extravagances.

This site provides articles of general information/and entertainment on retirement including money, lifestyle, health, and overall well being. The information provided here is our opinion and should not be construed as medical or financial advice. Please read our full policy and privacy terms.

In January 2020, FinanceBuzz released survey results revealing that 35% of Americans do not have any money saved for retirement. Millions of people are at risk of relying solely on Social Security Income once they retire. [1] When the average retiree only receives $18,000 in Social Security Income annually, most people will not be able to maintain their standard of living in retirement. [2, 3]

Interestingly, the average American planning to retire at age 65 estimates that they will need $1.9 million saved up to retire comfortably, according to a 2020 Charles Schwab study. [4] Yet, data shows that people in the 60-64 age group only have an average of $221,451.67 saved for retirement. [5]

Chances are, your current car still has some years left on it. Hold on to it for longer, especially if you have yet to pay it off. Rather than trading in your car as soon as you pay it off, or worse yet, trading it in before that, get in the habit of finishing your payments and holding on to your car for a certain number of years after that.

While you were working, taking out a loan for a car was simple and convenient. As long as you had a job and no credit issues, you could secure a car loan. However, without a job and living off the money you withdraw from retirement savings, financing might be challenging. And even if you are approved, you have to find room in your budget for a car payment.

Are you saving enough for a secure retirement? Most Americans aren't, often because putting aside extra cash for the future seems unaffordable. The problem is that you cannot live on Social Security alone, and since few employees have guaranteed pensions in today's economy, that means it falls on you to save enough cash for your golden years.

Of course, if you simply can't spare the money to save now, what can you do? Well, you can start by looking in your garage. If you have a late-model vehicle you're paying a car loan or a lease on, it could be one of the things that are ruining your chances at a secure retirement.

If you do what the average American does and take out a 68-month car loan for a new car that you keep for 79 months, you'd never even go a full year without a car loan (you'd only get an 11-month break before buying a new car). If you bought your first car at age 20 and worked until age 65, you'd be making auto loan payments for all but six years of your entire 45-year working life.

Used-car owners who take out a 66-month loan for a car they keep for 66 months would never get a break from a car loan at all, nor would a leaser ever have a break from lease payments. In any scenario, this means the average American is almost constantly paying for a car. But what if you could instead divert some of this cash to retirement savings instead? 041b061a72


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