How to Know if It's the Right Time to Buy a Car

Buying a new vehicle is more fun when you know the time is right.

There are a lot of reasons to want a new (or a gently used) vehicle. Maybe you saw something on the highway that caught your fancy or your significant other has a crazy crush on the latest Tesla model. Perhaps your car needs one-too-many repairs and has become a bit of a money pit. Whatever your reason for considering purchasing a new vehicle, here's how to know when the time is right.

You've outgrown your current vehicle

Let's be honest here: If you just had your third or fourth child and are still driving a MINI Cooper or Volkswagen Beetle, you've probably outgrown your vehicle. There's little chance of fitting three (and certainly not four) car seats into the backseat of your car. Unless you have another, larger vehicle to transport your children, it's time to look for something that better accommodates your growing family.

It costs you an arm and a leg

If your vehicle is worth $1,500 but needs $3,000 in repairs, it's time to find something that won't empty your bank account every time there's a problem. At some point, you have to admit that you're putting more into your car than you can ever hope to get out of it. Buying something new and saving yourself the hassle of worrying about breaking down on the side of the highway is a smart decision.

It's unsafe

Each year, the National Highway Traffic Safety Administration (NHTSA) analyzes which vehicles result in the most significant number of fatalities. If you're driving a car on that list, there's no shame in looking for a vehicle that's more reliable. Not only will you be safer on the road, but the best car insurance companies will charge you less in insurance premiums when you drive a safe vehicle.

You're financially prepared

Sometimes you want a new car but don't have a good reason for buying one. If you find yourself in that position, ask yourself the following questions:

• Do I have an emergency fund in place in case things go south? If not, focus on putting enough away to cover at least three to six months' worth of bills.
• Can I easily make the monthly payment? If you have a budgeting method to manage your finances and a new car payment doesn't fit, figure out what you need to spend to keep your current car running until you can afford another payment.
• Is there anything else I should do with the money? This could be things like paying school fees for the kids, making repairs to your home, or contributing more to your retirement account. You are less likely to enjoy a new vehicle if paying for it means not being able to cover other expenses.

If you decide that now is not the right time to buy a car, all is not lost. Focus on other financial goals until you have them under control, and revisit the idea of purchasing a new vehicle once you're in a stronger financial position.

Here's the good news: The Federal Reserve foresees rate hikes in coming years but expects rates to stay near zero through 2023. Even if you notice a small hike in auto loan rates, it should be minimal for the next couple of years. Let's look at the auto loan basics of what would happen if rates jumped 0.50%.

RELATED: See The Ascent's guide to the best cheap car insurance.

In this scenario, waiting to buy a car until you have other financial issues taken care of will cost you an extra $403 (less than $7 per month) in interest over five years.

You have a long-term plan

If one of these long-term scenarios fit, it may be time to shop for a new vehicle:

• You have a "tween" child and want to provide them with a safe used car when they're 16 or 17. That may mean buying the safest car currently on the market today, driving it until you're ready to pass it down, and buying yourself another vehicle at that time.
• You're planning to retire and don't want to retire with a car payment. Buying a new, dependable car now and paying it off before you hit retirement age could be the best way to pay for a new car.

In most situations, buying a new vehicle can be exciting. It's even more fun after you've thought it through and are sure that it's the right time.