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Questions To Ask Yourself Before Buying A Car

Questions To Ask Yourself Before Buying A Car

Buying a new or used car can be a very massive cost, and it almost always has a significant impact on your budget. At the end of July, the average transaction cost of a new light vehicle (i.e. cars and small trucks) was $35,359, up around 3% from last year. And the average used-car price in the first quarter of 2018 was about $19,657, up 2.2 percent from the same period a year ago.

With the price of both new and used cars hitting record rates, it's worth taking a few minutes to ask yourself a handful of questions and make sure you're ready to make such a big purchase. Here are the five that you should consider:

 

Buy New Or Used?

This may be one of the most important questions you have to ask before you buy a vehicle, since opting to buy used will help you keep thousands of dollars in your bank account.

Given that there is a $15,000 difference between the average price of a new and used vehicle, there is little room for debate as to what is the best deal. Not only are you paying more money on a new car, but the vehicle is also losing 10% of its value the second it leaves the dealership, and another 10 percent after the first year, according to Carfax. 

Sure, there are some benefits to buying a new vehicle. It'll probably have fewer miles and you'll get full warranty (not to mention the smell of a new car). It might make sense for people who have long trips or drive a lot for their work to get a new vehicle. But remember, you can still get the manufacturer's warranty on some cars, even if you're not the original owner.

In addition, vehicles last longer than ever (the average age of a car currently on the road is about 11 years), so taking one for a few thousand dollars less with just a few thousand miles is more than worth it. Sure, you're going to lose the smell of a new car, but that's going to fade after a couple of months anyway.

 

Is It The Right Time To Buy?

No I'm not talking about making the most of the end-of - the-year deals or holiday sales cases. Tell yourself if this is the best time to add substantial car payments to your monthly budget or spend a good portion of your savings. If your car purchase was anything like mine, you might not have a lot of choices when you buy it. The first time I had to buy a replacement car was when a flash flood overtook my car while I was out of town; the second time was when the engine in my wife's car would turn off at random and not start back until it felt like it. In both cases, putting off the purchase was simply not an option. But if you have a choice whether or not to purchase a vehicle right now, it might be best to put it off for a couple of months while you save more money. This will give you a chance to make a larger down payment, or maybe even buy a car in cash.

 

How Much Should You Spend?

There's no ideal number for you to spend on a car, but it's wise to keep the 50/30/20 budgeting rule in mind as a loose guide to making your decision. The rule says you're not supposed to spend more than 50 percent of your income on fixed expenses such as mortgage or rent, smartphone bills, or car payments. So if you're trying to decide how much car you can afford, make sure that whatever fee you end up with doesn't tip your overall fixed costs over 50% of your income. 

You might also want to hear what Dave Ramsey's savings and debt-repayment guru says. Ramsey's website says that the total value of all the cars should never be more than half of your annual income. So if you're single, and you're making $50,000, then your car shouldn't cost more than $25,000.

Just note, knowing how much you can afford depends entirely on your own personal expenses. Add all your monthly costs to find out how much money you have left over. Is it enough to pay for a car? If you've already had a hard time covering some of the expenses, it might not be the best time to add a car payment.

 

How To Get The Best Financing Deal?

First, talk about all aspects of financing. Buying a car in cash isn't an option for most people, and it might not be the best idea for your finances either.  

Before you head to the dealership, you need to do your own research to find out what interest rate you are eligible for. This is important to do ahead of time because there is no guarantee that the lenders the dealers use will give you the best interest rate.

Make some online comparisons of interest rates from your bank and local credit unions, and even secure financing in advance if necessary. This will not only help speed up the purchase process, but will also ensure that you get the best interest rate available to you.

In the same way, be aware of how long the duration of your financing is. The average duration of a new car loan is 69 months and the most common period is 72 months, according to Experian. Dragging out your car payments will dramatically increase the overall vehicle price. For example, a $20,000 car that has been paying for for 69 months at a 5 percent interest rate would cost you $23,054 by the time you pay it off.

 

Do I Have An Understanding About The Vehicle?

This could be one of the most overlooked aspects of buying a new or used car. But it could save you thousands of dollars and a lot of headaches if you just spend your time researching the vehicle you want to buy.

When you're going to buy a vehicle, don't just worry about whether you want a Jeep or a truck or a black car or a red one. Spend some time figuring out whether or not your make and model has a good history of reliability. This is easier than ever to do by purchasing an inexpensive Consumer Report login (some local libraries offer free login) and quickly searching for the make, model, and year of your vehicle.

You'll see how the car compares to similar vehicles, how well current owners rate it, whether it's recommended by Consumer Reports (it does comprehensive independent automotive tests) and potential trouble spots to watch. 

This knowledge can be crucial, particularly if you are undecided between two vehicles. For example, if a car has a bad rating for its transmission, you would want to go with a vehicle that scored higher in that category. Spending a minimum amount on your Consumer Report membership could save you thousands of repair costs by helping you buy the right vehicle.

 

Conclusion

No matter which car you buy or how much you end up spending, make sure you get as much information as you can about the vehicle and the financing options. There's nothing wrong with getting the car you want, but you need to know what you can afford and how much it will cost you in the end. Ask yourself the above questions, and you're going to be well on your way to remaining within your budget and in a much better position to start negotiating.


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