3 Things Everyone Should Do Before Buying A Car
Are you ready to buy a new or used car but don't know where to start?
Following these 3 easy steps can help you get the right auto loan to fit your needs without regretting your decision later. No one likes buyer's remorse!
1) Research what a new or used car will cost
If you've been shopping for a car, it's no surprise to you that cars can be expensive, even used cars. According to JDPower.com, "When consumers aren't buying new cars, they're holding on to their old ones. As a result, fewer used cars are available for sale. Without a healthy market for new car sales, the used car supply dries up, and the cost skyrockets due to this reduced inventory. This is precisely what we're experiencing today."
Since the cost of a car has increased over the last year, it's even more important to consider the total cost of purchasing a new or used car.
Here are things to consider when deciding on your next car:
- Decide on a range you are willing to spend on your car, such as $15,000- $20,000
- Calculate your Loan payment based on the range and interest you'll pay
- Car Insurance--Your insurance agent should be able to provide an estimate, ask for different deductibles to compare costs
- Regular maintenance such as oil changes and new tires and brakes
- Unexpected repairs
Let's focus on your monthly payment. A low monthly payment may look good but spread over a longer term, such as 84 months, you may pay more than you really should once you calculate the amount of interest you'll pay over the life of the loan. If you can afford a shorter loan term you'll end up saving more money in the long run.
However, sometimes it makes sense to have the lowest payment possible. Here are a few reasons why a low monthly payment might be important:
- If you are buying a home within the next few years and need to save for a down payment
- If you are moving out on your own and don't know what additional expenses you might have
- If you are just starting out in your job
- If you need to borrow in the near future for college or other large expense
2) Narrow your search by choosing a few cars
Now that you've determined what payment is affordable based on your purchase amount, pick a few cars you like that fit your budget. Consider how often and in what kind of weather you usually drive to decide if it's a practical choice. That fancy convertible might look tempting, but it may not be a great choice if you plan to drive it in the snowy Midwest. Sometimes functionality beats fun!
Once you have narrowed down which car you would like, then it makes sense to head to the dealership to work with a salesperson. Or some websites have the option to start the search online by submitting a form. Before you start, don't forget to learn more about getting pre-approved to save time and potentially thousands of dollars by getting a better rate.
If you are searching for a used vehicle, websites like www.Autotrader.com and www.carguru.com can help you narrow down your options without spending an entire day visiting car dealerships. Or if you've purchased from a specific dealership in the past, visiting its website is another great place to start narrowing down your options based on your budget.
If you choose a new or used car, it’s important when taking out a car loan not to end up paying more for the car than what it's worth. A site like www.KBB.com or www.NADA.com can provide information on how much you should pay for a car. It's also a resource if you are trading in your current car for a new one.
Now that you've narrowed down your search, don’t forget to visit www.edmunds.com to estimate the true cost of ownership including insurance, gas, maintenance and more. (link to edmunds.com/tco) Or check out www.carcomplaints.com to see if there are major issues with the year, make, and model of the vehicle you are interested in.
3) Secure financing before visiting the dealer
Choosing the right loan can be just as important as choosing the right car. Deciding on financing before you go shopping is key to not overspending. When you're pre-approved for your car loan, you have peace of mind knowing your financing is in place and you are able to focus on getting the lowest price for the car. You can feel confident communicating to the dealer what you can afford to pay for your new car, without feeling pressure to get dealer financing or choosing a car with a price beyond what you want to spend. Learn more about how easy it is to apply and sign for the loan without leaving your home.
Taking the time to find out how much your new or used car will cost by determining a budget, choosing a car that fits your budget, learning what the total cost of ownership might be and getting your financing squared away before you go shopping will make the experience better for you and your monthly budget.