In the Market for a New Car? Consider This Before You Head to the Dealership

By Ventura Perez III, Houston Region Executive, Bank of America

Buying a car is a huge financial decision – and one that often comes with unexpected expenses and various discount choices that can leave you torn between options. With many Houstonians in the market looking for a replacement vehicle, it is more important than ever for families to have access to the tools they need to make a smart and informed decision on their next vehicle.

When considering a new car, don’t overlook these key considerations before you head to the dealership:

The true cost of a car goes beyond the monthly car payments

Once you decide what car you want, figuring out what you can actually afford can seem a bit complicated. Your monthly car payments might be affordable, but you also have to keep in mind other costs you’ll have, like insurance payments, registration fees, and unpredictable expenses like a sudden hike in gas prices or the need for a big repair. So, before you begin to shop around for a car, you might want to take a look at some of these costs so you’re not caught off guard.

On average, people spend about fourteen to sixteen percent of their annual income, before taxes, on their transportation budget. That’s a figure that includes all the expenses of owning a car—not just your car payments. Before buying a new car, make sure to take these expenses into consideration, and consider mapping out your budget using free online tools like

You have a budget, but should you buy or to lease?

Answering these questions will help you decide which is best for your needs:


  • Do you want the car for just a few years, or longer? 


    • If it is a long-term car, it’s typically cheaper to purchase a new car.
  • How many miles do you expect to put on your vehicle annually? 
    • Understand your driving habits as some leases have mileage limits from 10,000 to 15,000 miles per year, or 36,000 miles for the life of a standard three-year lease. Additional miles can lead to additional costs.
  • How hard are you on your vehicle? 
    • Pretty rough?  Be mindful of additional or hidden fees associated with wear and tear on leased cars.
  • Do you love the latest gadgets?  If so, lease may be a good option as you’ll have more flexibility to trade in for the latest model and the newest gadgets.
  • Does the deal seem too good to be true? 
    • Read the fine print and don’t be shy about asking questions.  For example, if you are getting a promotion or deal such as no money down, how does that impact monthly payments, the interest rate, etc.?  What can you really afford?

Rebate vs. lower interest: Which car incentive is right for you? 

As Houstonians are negotiating the price on their car, dealerships are offering a wide range of incentives. Make sure to understand the differences and how it will impact all the financials, such as your monthly payments.

  • Cash rebate: The car manufacturer gives you a one-time rebate usually deducted from your car’s purchase price. Rebate amounts vary, but they usually range from $1,000 to $3,000.
  • Low interest rate: The dealer offers an interest rate on a loan that is lower than the normal rates offered. Keep in mind when evaluating the low interest rate offer that only those with excellent credit qualify for the lowest published rates.
  • Calculate your payments to decide if a rebate or lower interest rate is a better choice for you.  Find an example of how to calculate your payments here.
  • Consider all the variables: If your goal is to end up with the lowest monthly payment, the cash rebate is typically the better alternative. However, variables such as how much money you put down, the total purchase price of the vehicle, any trade-in values, your local sales tax rate and the length of the loan can affect the total you pay. A longer loan term can lower your monthly payment, but you pay more total interest over the life of the loan.

The good news is there are helpful resources available to you, like Better Money Habits – Bank of America’s free financial education site that helps consumers connect information to their goals and decide what the best financial options are for their personal situation. For more information on how to make sure the car-buying process runs smoothly, or for tips on personal finance goals, visit