Preparing to Buy a Car
Five questions to ask yourself first
Buying your first car is a big financial commitment. It is important to carefully consider how much you can afford to pay for the car. Additionally, you need to look at how the value of your car will change over time. Here are five basic things to consider which will help you avoid making mistakes when you buy a car. Your options may be different if you do not qualify for a car loan.
How Much Do You Have to Spend on a Car?
There are so many creative ways to finance a car that you may fool yourself into thinking that you can afford to buy a more expensive car then you should. One basic rule of thumb is that you should finance your car for a three-year term. If you cannot afford the payment that accompanies this amount, then you cannot afford the car. Your job situation will change, but should likely remain stable for around three years. Additionally, you should avoid trading in your car and rolling the old loan into a new one.
You may be able to lower your monthly payment by having a large down payment.
What Type of Car Do You Need?
Do you need an SUV or will a small compact car suit your needs just as well? If you are a camper or haul stuff around for presentations, then the SUV would be the right choice for you. The smaller your car the more you will save on gas money and other costs. Your first car does not need to be your dream car. When looking for a car, it is more important to focus on safety and reliability rather than looks.
Should I Buy New or Used?
It may be difficult to choose between a new and used car. When you buy a new car you immediately lose two or three thousand dollars. The car depreciates that much once you drive off of the lot. If you can afford to lose that much money, go ahead and buy new. If you buy a car between three and five years old you will avoid losing a lot in depreciation of value. If you are worried about buying a used car you can find cars with warranties available or cars that are certified by the dealers or makers of the car.
You may be able to save money by buying directly from a private seller. If you choose this option, have the car checked by a mechanic before you make the purchase. This should help you save money.
Should I Ever Lease a Car?
No. You should never lease a car. It is simply throwing money out of the window. If you decide to purchase the car at the end of the lease, you will end up spending more money than if you had purchased it originally. Additionally, it is difficult to avoid the over mileage fees. If you can not afford the car payments on the car you want, then change your expectations. You may buy an older car to drive while you save up for your dream car. People who like to have a new car every two or three years often argue that leasing is a great option, but this is an attitude that will end up with you constantly having a car payment.
There is a lot you can do with the money you would be spending on your car payment.
Can I Get by Without a Car?
If you live in a large city with good public transportation, you may be able to get by with using a car share. This can save you quite a bit of money each month, and allow you to save money to purchase your first car with cash. If you are married, you may opt to have just one car instead of two while you save up to pay for your second car with cash.