It's no secret that used cars are an affordable option for buyers—especially for penny-pinching millennials. "They really are making very pragmatic choices," said Edmunds.com analyst Jeremy Acevedo.
According to Edmunds.com, the most popular used car for millennials is the Dodge Magnum, a roomy station wagon. That's followed (in order) by the Chrysler Pacifica, Subaru WRX, Chevrolet TrailBlazer, Volkswagen R32, Pontiac Aztek, Nissan GT-R, Saturn Outlook, Dodge Durango and Lexus IS-F.
They aren't the flashiest or fanciest cars, said Acevedo, which may surprise some. But he noted that millennial buyers tend to seek out cars that are specific to their individual needs and tastes. If you're in the market for a used car, here's how to make sure you get the most for your money.
Know your number
"Before you even start shopping, know what you can afford," said Marty Durbin, certified financial planner at Crawford, Carter, Thompson & Durbin in Mineral Wells, Texas. "The biggest mistake people make is going car shopping before they figure out that number."
Start by calculating your budget. If you can pay cash upfront, great. But many buyers will have to get a loan. Durbin advises that your total monthly debt payments not add up to more than 36 percent of your gross income. So once you've tallied up your current payments, see how much of that 36 percent is left. Aim not to spend more than that on a monthly car payment.
Both Acevedo and Durbin suggest that the next best thing after cash is a preapproved loan from a credit union where you can get, for example, "a 3 percent rate versus, say, a 5 percent rate at a dealership," said Durbin. "It's good to shop around and do your homework," he added. (Keep in mind that interest rates are likely to go up as the Federal Reserve raises rates, which it's expected to do in the next several months.)
To help you plan your budget and payments try using an auto loan calculator like that at Bankrate.com.