Bills don’t stop after retirement. Although expenses are typically lower when you retire–especially if you are no longer supporting anyone other than yourself–the monthly payables are, unfortunately, a permanent fixture of everyone’s life.
One of the most common expenses of the average American is the monthly car payment. Many retirees finish paying off their cars long before they retire, but this is not always true for everyone. Some retirees buy new cars shortly before retirement, while others have to replace their vehicles after they retire.
Either way, keeping up with car payments when you are no longer working can be a challenge. That said, here are some tips on how to keep up with car payments during retirement.
Buy a used car
When you do it right, buying a used car can be significantly more cost-effective than buying a new one, especially since you won’t need to drive to and from work anymore. Nevertheless, buying a used car always carries some risk that you are going to have to be willing to take.
To make sure that the car you’re buying won’t cost you more money in the long run, here are some important things to remember:
- Buy from a reputable dealership. Do your homework. Not all used car dealerships are made equal. If you’re in the market for a used car, spend more than enough time researching the potential dealerships that you come across. Scour customer reviews, read the fine print, and observe how they treat their customers. If something doesn’t feel right with the dealership you’re eyeing, trust your gut.
- Take a mechanic with you. Many car problems cannot be seen or heard. When looking for the right car, take an experienced mechanic with you to see if the vehicle is worth your money. A mechanic can also help you analyze the car’s history from the records that the dealership provides.
- Research the car itself. If a particular car catches your eye, a quick Google search will tell you all about the manufacturer and model. Researching the car will also let you know if spare parts are readily available in your area.
- Don’t skip the test drive. A test drive will give you a good feel of the condition of the car. It’s also a great way to see if the car is comfortable enough to drive at your age.
Consider leasing instead of buying
There seems to be a never-ending argument when it comes to whether retirees should buy or lease cars. But at the end of the day, the right choice depends on multiple factors, including your age, income, and future plans.
To help you decide whether you should buy a car or lease one, we’ve come up with the major advantages for each option::
Pros of buying:
- Allows you to eventually pay off the car and eliminate monthly payments
- Gives you an asset that you can sell or trade in later on
- Does not limit the number of miles you can drive
- Is more cost-effective if you plan to drive long distances frequently
Pros of leasing
- Yields cheaper monthly payments compared to car loans, making it more affordable for retirees on fixed incomes
- Allows you to return the vehicle when you are no longer able to drive (an important factor for older retirees)
- Allows you to get the latest model, increasing safety, convenience, fuel efficiency, and comfort
- Comes with warranty protection that will help protect your finances in case you get into an accident
- Gives you the ability to walk away for any reason (no longer able to drive, want to get a different model, moving to the other side of the country, etc.)
Leasing a car instead of buying one can lower your monthly car payments during retirement. While the car is technically not yours, you don’t have to worry about things like applying for a car loan, keeping up with car maintenance, or fixing the car in case you get into an accident.
Refinance your car loan
If you took out a loan on your car and are currently struggling to make the monthly payments, consider refinancing. Refinancing your car loan can lower your interest rates and extend the life of the loan, both of which can lower your monthly payments. It’s best to do this before you start missing payments, as refinancing to a lower interest rate typically requires a better credit score than when you took out the existing loan.
But what if your credit score is not higher than when you first took out the loan on your car? Refinancing can still lower your monthly payments by extending the life of your existing loan. Although extending your loan can mean you will be paying more money in the long run, it’ll help you lower your monthly car payments and avoid defaulting.
Trade-in for a cheaper model
Having a cheaper car can make it easier to keep up with car payments during retirement. That said, consider trading in your current vehicle for a cheaper brand or model that will still fit your needs when it comes to storage space and seating capacity. After all, you probably don’t need a car that will fit a whole family or make it through daily commutes now that you are retired.
Keeping up with car payments during retirement can be a pain, especially if you are living on a fixed income. Nevertheless, there are many ways you can lower your car payments and make it easier for you to pay all your bills on time while still having a convenient mode of transportation–maybe one or two of the strategies above can help!
If you want to read more tips for a fulfilling, hassle-free retirement, check out our other blogs here.