How should I go about buying a car?
Know the facts first: a car is not an investment. It is a depreciating asset, meaning it loses value over time. On average, new cars and trucks lose more than 20% of their value in the first year (Motley Fool). On the flipside, that means that if you can find a well-maintained car that’s just one or two years old, you’ll get a huge discount on an almost-new model!
Follow these tips to increase the chances of getting the best auto financing option for your car purchase. As mentioned above, getting the best financing is only part of the equation, you should negotiate for the lowest purchase price. Doing your research, calculations and negotiating can save you thousands of dollars.
Consider these tips on your next auto purchase:
1. Assess your budget. Review your budget and calculate how much car you can afford. This will help you set the guidelines for a better informed financial decision.
2. Check your credit report. Make improvements by fixing incorrect information, disputing inaccuracies and paying off existing debt and settling any collection accounts. Know your credit score (get your free credit score through Quizzle or Credit Karma to get an idea of where you fall in the credit score range).
3. Get an auto loan pre-approval. Reach out to your bank and credit union and apply for an approval. This will hep you determine how much financing is available but not necessarily needed. A sizable downpayment can help you negotiate a lower interest or better terms.
4. Determine your car requirements. What do you need and want? Know which car is right for you.
5. Shop for the best deal. The amount you pay for a car is based on the price you’re paying. The lower a price the overall lower total cost for the car.
6. Consider new or used, buying or leasing and down payment amount. Do the math to figure out which option is actually best for your situation. The goal isn’t to spend money on a car but rather buying the car at the lowest total cost.
7. Know your legal responsibilities and consumer rights. It’s important you understand the laws around car ownership in your state and consumer rights with regards to your car purchase.
When making a car purchase always think about your long term future. The satisfaction you feel driving off the dealership lot is powerful but making a poor financial decision will have a long lasting impact. The cost of the car and financing charges are only part of the true cost of car ownership. There are ongoing costs such as annual registrations, gas fill ups, maintenance costs such as tune ups and car washes, and insurance payments.