Define your budget
It is a good idea to sit down and determine how much you can afford to spend before you even begin car shopping. Some sources advise limiting car expenses to no more than 35% of your monthly income, but you should ideally strive for under 15%. Therefore, your automobile payment should not be more than $600 if your total monthly income is $4,000 each month. To calculate your monthly car payment, use a loan calculator.
Remember that you will also need to set aside monthly money for parking, maintenance, and insurance in addition to your car payment.
Avoid buying new
Even if we like the scent of a brand-new car, buying a new car is typically not a wise financial decision due to the expensive monthly cost. Within weeks of being driven off the lot, the majority of automobiles lose up to a quarter of their value. Instead, leasing or purchasing a vehicle with low mileage might make more sense. Even with a car that is only a year old and has 10,000 miles on it, you can save a ton of money.
In addition, reliable dealers put their pre-owned vehicles through stringent testing and inspections to ensure they satisfy the requirements specified by the manufacturer. These “pre-owned” vehicles still have the original manufacturer’s guarantee, giving you peace of mind that any problems will be addressed.
Reconsider trading in your old car
The main reason why most individuals decide to trade in their old automobile is simply convenience—they do not have to deal with the headache of selling it themselves. However, if you want to get the maximum money for your car, you need to think twice before handing the dealer your keys.
The main goal of a dealership, like any business, is to turn a profit. For them to have the flexibility to mark up the price and turn a profit, they must buy your automobile at a significant discount.
Compare car loan rates
Those dealership advertisements that scream “Instantly Approved!” or “No Credit Checks!” seem alluring, aren’t they? Unfortunately, there is nearly always a catch to those deals that seem too good to be true. They frequently have absurdly high loan rates or hefty down payments.
You would be better off comparing loan rates from several sources, such as your bank or neighborhood credit union, or a business like AutoLoanZoom.com, which provides quotations in seconds without hurting your credit score. You should first ensure that your credit score is in excellent standing and that you are assured you will not have any problem making the required monthly payments.
Prioritize car needs and features
Before starting your search, it is essential to understand your specific care requirements. The accessories on today’s cars are many, ranging from LED accent lighting to heated seats. But here, we are not only discussing the color or the manufacturer but also the practical aspects.
Among the useful considerations are:
- The average amount of passengers you will carry
- How much room you will need for cargo
- Whether you will be driving on a highway, in a city, or off-road
- How much parking is there at your disposal?
- You value car amenities like the rearview camera, GPS, heated seats, etc.
To save on your gasoline expenditures, avoid purchasing a larger car than you need. Additionally, if you cannot afford the payments on the vehicle, you believe you need, do not buy it.
Think twice about leasing
At first glance, leasing may seem like a smart choice. You get to drive away in a brand-new automobile for less money each month than you would have paid for it with a personal loan, and after a few years, you may trade it in for a newer model. But leasing has drawbacks that you might not have thought about. You will not own the vehicle; therefore, you won’t be able to sell it or make any modifications to it. Additionally, the number of miles you can put on it will be restricted; many leases have a ceiling of 12,000 to 15,000 miles annually, beyond which you will have to pay an additional fee.
Most importantly, breaking your lease will significantly lower your credit score if anything unforeseen occurs and you are no longer able to purchase your automobile.
Some people may not have the option of buying rather than leasing, but if you can make it work, it is something to think about.
Get the shortest loan term you can afford
While lengthier loan periods do result in cheaper monthly payments, you will pay more in interest over the course of the loan. You will thus probably end up owing hundreds (or thousands) of dollars more than you would with a shorter term, even though your payments will not be as significant.
Avoid taking out loans that are longer than five years (60 months), and if at all feasible, try to acquire one that is as short as the warranty on your automobile. You will not have to pay for repairs and your monthly payment in the same month if your automobile experiences any issues after the warranty expires.
Look For Deals Online
Although it might seem apparent, you should browse online first before hitting the pavement. Although private sellers on websites could offer you a bargain, you might not get the same guarantees regarding the condition of the automobile as you would if you were purchasing from a dealer. Additionally, if you purchase from a private seller, you will be accountable for all future repairs and expenses.
It is a good idea to compare prices between private sellers and dealers to get an idea of the price difference because nowadays the majority of dealerships post their whole inventory online. Even though a dealer may charge more, the additional cost could be justified if they provide a strong warranty.
It is a good idea to compare prices between private sellers and dealers to get an idea of the price difference because nowadays the majority of dealerships post their whole inventory online. Even though a dealer may charge more, the additional cost could be justified if they provide a strong warranty.
Negotiate everything
Some individuals find it uncomfortable to consider bargaining for a cheaper price, but everyone has grown to accept haggling as a necessary part of the car-buying process. You will not be disrespecting the car salesperson by attempting to negotiate a better price because they do it every day.
Do your research beforehand and go into knowing what similar vehicles typically sell for in your area. Additionally, before you arrive, you should decide on a hard “walk-away price” (the most you are willing to pay). You leave if a salesman will not accept that offer.
Before you reach a price, you can both agree on, expect some back and forth. Stick to your guns and inform the dealer you are going to look elsewhere if they will not go below your walk-away price.
Do your due diligence
Before you sign on the dotted line, regardless of whether you purchase anything privately or via a dealer, it is imperative that you conduct your due diligence.
Once you have decided on a vehicle, obtain the VIN, and use a website like Carfax or AutoCheck to acquire a vehicle history report. You may learn specifics about the car’s prior owners, accident history, mileage, and other information by consulting a vehicle history report.
A car history record is typically provided without charge by dealerships, but if you purchase one independently, you should expect to pay between $25 and $40. That cost is justified, especially if you are purchasing from a private seller; otherwise, you could have to spend hundreds of dollars on a Junker.
Once you get your vehicle history report, you must drive the automobile to a certified technician for a pre-purchase check. Ask the mechanic to check that any prior damage has been completely fixed after displaying your report to them.