The Collegiate Guide to Financial Literacy: Cars

Every time I look at the Fresno State parking lot, I always wonder: How do students afford to buy their cars? Some ideas of how they could are that their parents love them, are secretly rich, leased their car or make payments.

There are obviously other ways to own a car, but buying or leasing a car can be one of the most important financial decisions you make in college. That’s why it is important to know the impact your decision will make on the piggy bank.

If you need a car, there are three alternatives to consider: buying new, buying used or leasing.

Alternative 1: Buying a new car.

According to, one of the big three credit scoring agencies, the average car price is at $32,000. Gulp. For our purposes, let’s cut that price in half, and say that we, as college students, are looking for a car around $16,000. What would the financial implications be in purchasing a car around that price?

The first important thing to note is that the sticker price of a car is not the actual cost of the car. This is an important distinction. You may walk out of the dealership thinking you got an amazing deal at $16,000, but in reality, the auto loans you take out will add up to more than you might think. We’ll come back to auto loans.

If you were only to pay off the $16,000 (excluding the interest on a loan), you would be paying about $267 a month for the next five years. Five years! That means even if you are a freshman, you wouldn’t be done making payments until you graduated.

What could an extra $267 a month buy you?

Some basic examples are a month’s worth of groceries, a utility bill or even cover part of your rent.

These are just some of the options, and we haven’t even taken into account what you’ll pay with interest.

What would the car payment look like with a 5 percent interest rate on that $16,000 if you paid it off over five years? Every month you would be paying $302. The total amount of that $16,000 car would end up being $18,116.

If buying a new car isn’t a good choice for you, what about leasing?

Alternative 2: Leasing a car.

You pay for the heaviest depreciation of the car, are not allowed to keep the car after said depreciation, and have costly mileage limits.

Here is the only reason to lease a car while on a college budget: to look cool and impress friends.

If you have ever heard the phrase “new cars lose a lot of their value once driven off the lot” you have heard correctly. If you lease a car, guess who is paying for that lost value? You!

So buying and leasing a car may not be the best options. What else can you do?

Alternative 3: Buying a used car.

I know. Used cars are not sexy. In fact, they are probably one of the unsexiest things to purchase. You know what is sexy though? Having a bank account with actual money in it!

Let’s say you were able to get a used car with decent gas mileage, without too many miles and air conditioning (a must in Fresno) for around $6,000 with a 5 percent interest rate.

Everyone’s financial situation is different. If you can afford to buy a new car and really need one for whatever reason (safety reasons, comfort, etc.), then buy a new car and enjoy it!

If you are operating on a college budget and are looking to pay for a car while still being able to pay for rent, tuition, books and food, a used car will be a lot nicer to the old piggy bank.

Have specific financial questions? Send them here to:

About the Columnist: Conrad is an entrepreneur by nature, he currently runs an online marketing business, UNICO Marketing LLC, while serving as the current President of The Entrepreneurship Club at Fresno State and finishing his last semester at Fresno State. He has had more failures than successes, but is always looking for new ways to innovate. He believes that financial literacy is extremely important no matter the profession students choose and having the ability to life a life without worrying about a bank statement.

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