Are you on the verge of buying a new car, truck, or SUV in the near future? Is this your first time?
Many first-time car buyers are so excited about getting their hands on a brand-new vehicle that they fail to properly prepare for the buying process. This could create serious potential problems in your life, so it’s best to know what to expect ahead of time so you don’t make any grievous mistakes.
You might not realize this now since you’ve never purchased a car before, but there are certain pitfalls, mistakes, or things you just might not have considered that can have a negative effect on your life if you aren’t careful. Since we’d like all of our readers to avoid making foolish mistakes, we’ve decided to put together a handy guide of must know first time car buyer tips.
Please read this information thoroughly, absorb the lessons, and use them to avoid making huge mistakes when buying a motor vehicle for the first time.
1. Determine How Much You Can Pay for a Motor Vehicle
Remember, buying a brand-new car is a major commitment. For many of us, the monthly payment is going to be our second highest besides our housing payment – i.e. rent or mortgage – so you have to make sure you buy one within your means. Otherwise you’re going to struggle to pay your bills and you may not be able to afford to make your monthly payments. Before long, the repo man is going to be knocking on your door looking to take back your car.
So, at this stage of the game it’s time to thoroughly pour over your budget and determine how much money you can spend each month. Look at all of your expenses including your rent or mortgage payment, credit card payments, student loan payments, regular expenses like food, cable, Internet, phone, and everything else you can think of.
Add up all of your monthly expenses and determine how much you’re currently paying on a month by month basis. Now, add up your monthly salary and other income sources and subtract your monthly expenses from the total.
As an example, if you currently bring home $2500 per month after taxes and you spend $1500 per month on monthly expenses, you can theoretically spend as much as $1000 per month for monthly payments on a new car. But this isn’t exactly true because you have to factor in monthly insurance payments, gasoline, maintenance, and repairs. So in reality, you’d be better off keeping your monthly payment much lower so you have additional money available to pay for other car related expenses.
2. Discover the Ideal Purchase Price
Some new car buyers tend to pay top dollar for their vehicle. This is obviously a big mistake that needs to be fixed before signing your name on the dotted line.
You may have a particular style of car in mind that you want to buy. And based on all of the information you’ve read about this vehicle, it seems to be within your price range.
At this point, there’s an easy way to get an accurate reading on the amount people typically pay for this car in your area. You can look up the Kelley Blue Book value online to find out information about the price other buyers has paid. Driving guide is another excellent resource to use to answer many of your car related questions.
A third option is to meet with lenders at your local credit union. Believe it or not, they may have contacts at the local dealerships in the area. They can check with these contacts, run the current price you’re about to pay by them, and they can offer their expert opinion on the matter.
3. Know Your Financing Options
Last but certainly not least, many first-time car buyers fail to know and understand their financing options. This could be a big potential mistake since you could end up in a financing situation that isn’t in your best interest over the long run.
As you are about to learn, some vehicle financing options are much better than others. So you’ll want to save yourself the agony of making a foolish mistake and use this information to your advantage.
We’ve determined three terrible ways to finance a car. First, we feel you should never finance a car with a five year loan when possible. This is a big mistake because the longer the loan, the more money you’re going to end up paying in interest for the same car. So, if you can avoid five-year loans and still have enough in your budget to get your ideal car, we recommend financing with a shorter term loan.
Second, avoid bad credit car loans a.k.a. subprime car loans like the plague. On average, you could end up paying as much as 11% interest per month. With a regular loan, you might only have to pay 3%. This is a huge difference that will cost big bucks over the long run if you aren’t careful.
Third, always shop around when looking to obtain financing. You never know what type of interest rate you’ll get from one bank to another. So it’s definitely in your best interest to shop around and learn about all of your financing options.
On the flipside, there are also three better ways to obtain financing for your new car. The first is to get financing from a local credit union. These “banks” are often friendlier and provide better financing terms to their members. So if you aren’t a member of your local credit union yet, join up and reap the rewards.
Second, you should secure financing ahead of time if you have bad credit. By locking down financing ahead of time, you’ll get the best terms on your loan, which will more than likely be better than anything the dealership might offer you with their financing options.
Lastly, consider a short-term loan on a cheaper car. The cheaper the car and the shorter the loan means the less you have to pay. Obviously this is better from a financial standpoint because you’ll have low monthly payments that end quicker. You’ll have more money in your pocket to pay for unexpected expenses, put aside for retirement, or use any other way you deem fit.
As you can tell, it’s easy to make mistakes when buying your ideal ride for the very first time. We want you to have a phenomenal experience when buying a new car. We want you to feel like you’ve made an excellent purchase for the first time. So use the guidelines we’ve shared today and you’ll have no trouble buying the perfect car for an affordable price without getting ripped off.
Chris Mcdonald has been the lead news writer at complete connection. His passion for helping people in all aspects of online marketing flows through in the expert industry coverage he provides. Chris is also an author of tech blog Area19delegate. He likes spending his time with family, studying martial arts and plucking fat bass guitar strings.