Saving Money when Buying a Car
A car is a big purchase, especially a new car. Cars cost a lot of money and there are a lot of different choices to make when buying one. This gives you many different opportunities to make great decisions, but the possibility of making a mistake is increased as well.
Here are some tips to help you avoid financial issues when you’re buying a car.
Know your Budget
Before you start looking at car brands and features and trim packages, it’s important to know how much you can afford. Remember to factor the costs of maintenance and repairs into your budget as well.
Remember that how much you can afford and how much you can borrow aren’t the same thing. Some lenders will let you borrow a lot more than you can responsibly afford to repay. Just because you can get a loan for a certain amount, it doesn’t mean doing so is a good financial decision. Before you take out a car loan, think about how you’re going to repay it. How much will your monthly payments be? How long will it take you to pay off the car? You might not want to borrow as much as they’re willing to give.
Figure Out How You’re Going to Pay
This seems obvious, but it’s a step that some people don’t put too much thought into. How are you going to pay for your car?
There are a few options when it comes to buying a car. One is to buy a car in cash. This means paying off the full amount outright. Of course, this will probably mean that you won’t be able to afford as much. However, it will save you from paying interest, lease payments, etc. If you can afford to buy a car in cash, it’s probably a good financial decision.
One of the most common ways to buy a car is by getting financing. Most people get a car loan from the same place they buy their car. The terms and interest rate that you’ll be able to get will depend on the dealer, the type of car, your credit rating, and several other factors.
Note that sometimes the term of the loan won’t be long enough for you to pay off the car in full. In this case, there may be a buy-out at the end of the loan. This means that, when the term of the loan ends, you might have to pay off the remaining amount owing in full or get a new loan.
Know that zero-percent financing or other low financing offers may not necessarily be the most affordable options. There may be extra costs or hidden fees added into the price of the car when you choose these financing options, so make sure to check before you agree to anything.
Know the Right Time To Buy
You can save money by buying a car at the right time. One of the best times to buy a new car is right before the new model year comes out. At this point, dealers will want to get rid of existing stock to make way for new models. New car years don’t necessarily match the calendar year, so do some research into the cars you’re interested in and figure out when the new models are shipping.
It’s also a good idea to buy a car closer to the end of the month. Many car salespeople have monthly quotas and, if they’re behind their quota as month-end approaches, they could be more likely to give you a deal to make a sale.
Remember that Cars Aren’t Investments
Cars are large purchases, but that doesn’t make them investments. While most people assume that their home will increase in value over time (or at least maintain its value) the same is certainly not true for a new car. In fact, the value of a car drops about 20% as soon as it’s bought and driven off the lot. This is because it’s no longer “new” at this point.
And the depreciation continues. Most cars decrease in value about 5-15% each year, depending on the car and several other factors. This means that a car is a poor investment. It also means that, if it’s going to take you many, many years to pay off the loan, the car could be worth basically nothing by the time you’re done paying it off.
You don’t want to end up making big payments on a car that is worth barely any money. That’s why you’ll need to be careful not to borrow too much so that you won’t be making big payments for too long.