Is it time to buy a car? You’ve come to the right place. Getting behind the wheel of your new ride is exciting. There’s nothing like getting the right car but if you aren’t prepared for the car financing and buying process, you may end up with more headaches than thrills.
Buying a new or used car is often one of the most expensive purchases we make. So getting the right car that fits your needs, lifestyle and budget will help you enjoy your ride and won’t hamper your road to financial wellness.
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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). Basically, 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!
Consider these tips on your next car purchase:
Determine your car needs
What do you need and want? Know which car is right for you. There’s a difference between wanting a luxury car and needing a vehicle to get to-and-from work. Be clear about the reasoning behind the car and be aware of outside influences like keeping up with the Joneses or advertisements telling you happiness is only a big car payment away.
Assess your car budget
Review your budget and calculate how many car you can afford. This will help you set the guidelines for a better informed financial decision. Don’t have a budget? Create a budget to ensure your income and current expenses jive and you have room in your budget for the new monthly payment.
Check your credit report
Know your credit score. You can get your free credit score through Credit Karma. It’ll help you see where you fall in the credit score range. Make any necessary improvements by fixing incorrect credit information, disputing inaccuracies, pay off existing debt, and settling any collection accounts.
Get a car loan pre-approval
Reach out to your bank and credit union and apply for approval. This will help you determine how much financing is available but not necessarily needed. A sizable downpayment can help you negotiate a lower interest or better terms. Get more tips on how to finance a car.
Make a decision
Research the car. Take the time to narrow down your list of cars. Know the prices, styles and options. 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.
Shop for the best deal. The monthly payment amount is based on the final price after negotiating along with the interest rate received. Getting the lowest possible price and lowest interest rate can make an expensive purchase more budget friendly.
Test drive the car. Get to know the vehicle and take it out for a spin. This is an opportunity to get a feel for the car. Adjust the mirrors and seats. Play with the buttons and listen to the music.
Consider new or used and size of the 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.
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. You may want to know about state-specific laws (Lemon law).
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.