Yep, we went there.
When you start down that marriage road, sometimes it looks pretty bare bones. That is to say, you may not yet have a lot of stuff together. This may be particularly true for those who marry younger and don’t have a lot of money or help from family, and don’t own a lot of stuff separately, either. For those who marry older, and may own property prior to the marriage, you may have a lot of stuff of your own, just not a lot of assets together as a couple.
Believe it or not, a car is often the first togetherness purchase couples make. Why? Maybe because it’s a ‘serious enough’ purchase, but not as complicated and expensive as buying a house. And, a car is a great vehicle (pun intended) for learning to make financial decisions together. Budgeting, saving, making a purchase decision based on the expected costs of owning this vehicle are all a good test drive (pun intended, again) for your future union.
Another reason unmarried millennials are buying a new vehicle together as a first big purchase, is because their relationships are much more serious prior to marriage than generations before, and buying a car is often a necessity once they merge households. Marrying later has been a trend for millennials. The median age at which millennials marry has jumped since 2005 from age 27 to 29.9 for men and 25.5 to 28 for women, according to the US Census. Millennials are also dating for much longer, and often moving in together before heading to the altar. The average couple waits about 4.9 years to marry, according to a Bridebook study. The longer millennials wait to marry, the more time they have to accumulate assets that need protection.
If you and your fiancé are in the market for a new ride, let’s talk about the finances involved. There are different ways to go about saving for a new car, and they are not all created equal. For example, you could just keep cold hard cash in a sock drawer but then you’ll miss out on interest accruals. But hey, whatever works for you! Maybe you’ll find yourselves needing a new car without much notice or perhaps you’ve been planning for over a year to make the purchase when the time is right. Either way, having a savings account dedicated to a new vehicle investment is ideal.
The best time to plan for such a big purchase is well in advance of when you will need it. Whether your current vehicle is on its last…uh… wheels, or you’re simply looking to improve the luxury of your lifestyle, creating a budget that includes the future expense of a vehicle is paramount.
The first thing you should do is figure out how much car payment you can afford. If you can’t afford any car payment at all or just don’t want one, then you need to save up enough cash to purchase a new car outright. You can use this auto loan calculator to help determine what kind of down payment you need to make in order hit your target monthly payment number.
Once you figure out what you can afford in terms of monthly payments, you should create a timeline for your vehicle purchase. This will inform how much of your income is budgeted to the car purchase. The trick with all plans for saving is sticking to the actual plan. It can be easy to get distracted when you’ve built up a few thousand dollars in your car savings account—suddenly you might find that that trip to Hawaii is looking pretty good.
With patience and dedication, you’ll find yourselves well situated to make that car purchase when the time is right. If you veer off course, don’t fret. Be kind to yourself and simply hop back on the savings train.
You want a Tesla, he wants a Toyota
Something to consider is whether or not you should buy a brand new car or a gently used car. Most experts and your dad will be quick to note that you lose thousands of dollars by driving a brand new car off the lot. The depreciation of a new vehicle in the first few years all but ensures you won’t break even when you attempt to sell the car later on. Still, there are perks to purchasing a mint condition vehicle. Car and Driver notes that it’s easier to find exactly what you want if you decide to go with a new car. In fact, you can even customize the features you prefer—hello heated seats!
New cars also come with the most up to date tech and generally offer better gas mileage than their older counterparts. Another thing to consider is that dealerships want you to buy new cars, so they’ll sweeten the pot a little with better interest rates and financing plans. If your heart is set on a brand new car, then that’s ok because there are benefits to it. You’ll know exactly what car you’re getting and, let’s be honest, who doesn’t love that new car smell?
If, however, you’ve got a limited budget due to that big post-covid wedding extravaganza you are planning, then a gently used car may be your best option. You can often still find a fairly new car for half the price of what you’d pay for the brand new version. In addition, your insurance is likely to be cheaper on a used car because insurance rates are based on the car’s overall value.
Disadvantages of buying a used car include having to limit your options—you may have to settle on blue instead of a white exterior. You’ll also have to do more research. For example, if you buy from a private seller, then you’ll need to know the car’s history and whether or not it has a clean title (salvage titles are often uninsurable). It’s a huge headache to end up with an unreliable car because the seller didn’t disclose that it has an oil leak. Fortunately, services like CarFax can help with that.
At the end of the day, it’s a decision between you and your soon-to-be spouse, so as long as the both of you are well-informed and have a solid financial plan for making the purchase, then go for it!
Relationship milestone: First loan together <3
There are a few things to note when it comes to financing a car and there are three primary ways of going about it:
- Getting a loan from a bank or credit union
- Financing the car from the dealership
- Asking family for help
If you decide to apply for an auto loan from a bank or credit union, you’ll generally end up with preapproval before you go to the dealership. Once you know how much you’re approved for, you’ll go to the dealership with a Letter of Commitment for the quote from your bank. Once you decide on the car, the credit union or bank will run a hard credit check and then approve a loan. It’s important to note that auto loans through banks and credit unions often come with limitations. Banks don’t like to finance cars that have more than 10,000 miles on them, for example.
Applying for a car loan through the dealership offers some benefits in that the dealership submits the application to various lenders and then you get to choose which option best suits your needs. While this may seem like a no brainer, you should note that in some instances the salesman may negotiate an interest rate with you that’s higher than what the lender is actually offering. The dealership gets to keep the difference. If you’re in the market for a used car that doesn’t fit within the parameters of your bank or credit union loan, then financing through a dealership may be your best option.
Lastly, you could ask your family for help. It’s no secret that millions of couples today are burdened with student loan debt and just need financial help from their parents. If you have a good relationship with your parents, then consider asking them for an interest free loan, even if it’s just enough to help with the down payment. Keep in mind though, that a few thousand dollars isn’t worth putting a strain on Thanksgiving, so approach this option with caution. Besides, borrowing from family doesn’t improve your credit score, which is a perk of getting a loan through a lender.
Can the Car be Included in Your Prenup?
It sure can!
So, what does any of this have to do with marriage and prenups? Well, a lot actually. Prenups are legally binding agreements between two spouses that ultimately dictates how you’ll own your assets and debt obligations together. Although generally considered only a tool for divorce, prenups can also be used as a device that helps a couple budget their marital income and expenses. Perhaps your prenup includes a provision that says the spouse with the higher income pays 70% of the car payment. Or it could include a provision that says one spouse pays for the car and the other pays for the insurance premium. And sure, the prenup can also dictate who gets the car if the marriage ends.
If you buy the car during the course of your marriage, it’ll be considered marital property unless circumstances show that the car is intended to be owned individually only by one spouse. For example, if only your name is on the car’s title, and you were financially responsible for the car’s purchase and upkeep, then you could argue that it’s your sole property.
Prenups are excellent tools that many millennial couples increasingly employ when they marry. Although once considered a resource for the rich who want to protect their inheritance, many millennials today understand the serious nature of debt obligations and future earning potential. Prenups are indeed for everyone and not only do they help save you time, money, and headache if you divorce, but they also help couples create a roadmap of their financial lives together. This sort of planning helps married couples of any age or financial standing save for that new (or new to them) car, so they can keep on chugging down the road of life.
Julia Rodgers is HelloPrenup’s CEO and Co-Founder. She is a Massachusetts family law attorney and true believer in the value of prenuptial agreements. HelloPrenup was created with the goal of automating the prenup process, making it more collaborative, time efficient and cost effective. Julia believes that a healthy marriage is one in which couples can openly communicate about finances and life goals. You can read more about us here Questions? Reach out to Julia directly at [email protected].