What Car Should You Get after Divorce?
- Did you get custody of the family car?
- Do you need to buy a new car?
- Questions to answer before buying a car
- New vs. used cars
- Online used car-buying sites
Few of us can navigate life without a car today. But if you’re going through a divorce, your vehicles are considered marital assets, just like your home and furniture. As such, they will need to be divided as part of your property distribution.
If you and your soon-to-be ex-spouse each have a vehicle, that division will probably be pretty straightforward. You both will just retain your vehicle. But if you share a vehicle, one of you will end up with the family car, and one of you will be going car shopping after the divorce.
In an equitable distribution state, marital property is divided “fairly.” In a community property state, it’s divided 50/50. You may be wondering how this works with a car. Read What Is Equalization in Divorce? to learn about the possibility of equalization payments.
Did you get to keep the family car?
If you got the marital car in your property settlement and it’s paid off, good for you! You’ll transfer the title over, get insurance in your name, and become the official owner.
But if there’s an existing loan on the car, it will be a little more complicated. You won’t be able to change the car title over without the approval of the lender. In most cases, this means you’ll have to pay off the existing loan. If you can’t afford to do that, you’ll have to refinance it in your name.
The existing lender may agree to refinance the loan. They’ll check your credit history and determine what terms they’ll consider to refinance it. You may also want to consider going to another lender to refinance the car. The new lender would buy out the balance of the existing auto loan, and you would then be able to change the vehicle’s title to your name.
Do you need to buy a car?
If you didn’t get the car as part of your property division settlement, you’ll have to buy a new or used car after your divorce. If you've never purchased a vehicle on your own before, that can be daunting – especially if you have limited resources after the divorce. Before heading out to shop for cars, you’ll want to do some homework.
Questions to answer before buying a car
- What kind of budget do you have to work with?
- What type of car would best suit your needs?
- What manufacturer do you feel has the best reputation for quality and maintenance?
- What’s your credit score?
Check with a few lenders to see how much you’d qualify for if you were to finance your purchase. Car manufacturers typically have lending arms with better rates for good credit risks. Some even offer 0% financing for new cars.
After your divorce, you may not have a lot of money to devote to a car purchase. There are many affordable cars on the market today, but you’ll want to do plenty of research first.
No matter how much you love a car, you don't want to overextend yourself financially. If you’re financing, a good rule of thumb is not to spend more than 20% of your monthly income on car-related expenses. This includes car payments, gas, and maintenance.
But you also want to look beyond your monthly payment.
Dealers love to advertise “low monthly payments” to make you think you can afford a car. But those low monthly payments may stretch out for six years. Even if you can afford the monthly payment, do a reality check. Calculate what you’d really pay for the car when you consider the interest you'd pay by the end of the loan. Your car will depreciate significantly by then, and that might be enough of an incentive to pay cash or a larger down payment if you can.
Think about how much you drive, the length of your daily commute, and whether you need a vehicle to accommodate your kids and their friends. Evaluating your needs will help to decide whether you should focus on a smaller gas-economic vehicle, a hybrid, or a larger vehicle such as an SUV, van, or pickup truck.
What you can expect to pay
Before you visit a dealership, do some research to understand what your car of choice is likely to fetch on the lot. While there is a little wiggle room with a new car, you’ll want to be prepared for the spectrum of low to high prices.
Sites like Kelley Blue Book and Edmunds are valuable tools to see what your car of choice is worth, either new or used. If you have a trade-in, these sites will also give you an idea of what the dealership might offer you for your own car.
New vs. used car purchases
Will you be buying a used or new vehicle? Each option has advantages.
If you're looking for the latest bells and whistles, specific exterior and interior colors and options, and the best warranty terms possible, a new car is your best bet. As a newly divorced person, you may be hoping to get a car loan. Lenders offer better financing for new cars, and you won’t have to wonder whether the previous owner maintained the car or if it has been involved in an accident.
That said, the value of the car will depreciate the moment you drive it off the lot. You could be upside down quickly when financing a new car.
If you buy a certified pre-owned vehicle, it has been inspected, and it usually comes with a warranty. This can help reduce some of your financial stress. A used car will be less expensive than a new car and will suffer less immediate depreciation than a new one. You may not find the exact color/interior/option combination you wanted, but if you buy through a major dealership’s used car division, they can search for the combination you’re looking for. Insurance rates on used cars can also be lower than new car insurance rates.
A word about online used-car buying sites
You’ve seen those ads about buying and trading in a used car online. You buy a car through a website, and before you know it, a truck drives up and drops it off in front of your house. Too good to be true?
Online car-buying options are becoming more common. So far, they’ve been pretty successful – with a few glitches, depending on the company. It’s important to consider the pros and cons before going that route.
Pros of buying a car online
It’s convenient! There’s nothing like scrolling through listings of exactly what you’re looking for instead of walking up and down aisles and aisles of cars on a Saturday morning. Online sites have no-haggle buying (no pressure from aggressive car salespeople!), and you fill out all the paperwork online. You take delivery of your car wherever you choose.
Cons of buying a car online
You can’t physically inspect or test drive the car until it shows up in your driveway. While online sellers used to offer warranties and return policies to make up for the inability to see and drive the car, they now tend to offer test drives before the transaction at a time or place of your choosing.
No-haggle pricing also means no price negotiating, including what they will offer you on your trade. Your financing options may also be more limited.
After your divorce, you’ll need car insurance in your own name. Most states require this as part of having a driver’s license and owning a car. Your lender and dealer will also require proof of insurance before you get ownership of the vehicle.
Navigating all the financial aspects of a divorce can be overwhelming, including buying your first post-divorce car. Take your time, do your homework, and enlist the help of an experienced car-buying friend or family member who can give you tips and help you wade through your sea of options.
Do you need more financial advice for your post-divorce life? At Hello Divorce, we have online professional services and helpful resources that can take the mystery out of the divorce process as well as the chapter that follows. Let us help. Schedule a free 15-minute phone call.
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