Are you in looking to buy a new vehicle? Getting a new car is an important financial decision – even more so when you have the luxury of planning out your car purchase ahead of time. So, do you have a plan for your next car purchase? How do you intend to pay for your new car? Some car buyers prefer to pay cash in full so that they can own their vehicle outright while avoiding monthly car payments. Some people finance their vehicle through the dealer, while others apply for a loan through their bank. Here are 10 things to consider before making your next car purchase:
1. Skip the loan and pay in cash
Paying in full for your car using cash can save you a significant chunk of money that you would otherwise spend on interest alone. Additionally, some dealerships also offer cash discounts to customers, as well.
2. Compare prices at multiple dealerships
If nothing else, shopping around at several dealers will at least give you an idea of what you can expect to get for your price range – and an advantage when negotiating, too.
3. Research your car ahead of time
Before you head out looking for a car, private party, or dealership, make sure you know the market value of the vehicles that you want. The easiest way to do this is to research the Kelley Blue Book price for each make and model. You may also want to check out the Consumer Report for the car, as well. When you find a car check the Carfax on it see if it has been involved in previous accidents. Carfax will also tell you the maintenance history as well sometimes depending on the shop the work was done at. Check out the Insurance cost of the vehicle. A 5000 Lbs. SUV will cost way more than a Prius. Search google for any areas that it might have issues. For instance, I really wanted a Durango I looked online and found that they would just shut down driving down the road for no apparent reason. I did not buy this car!
4. Choose used over new
Have you ever heard the expression your car depreciates as soon as you drive it off the lot? This is true sometimes by many thousands of dollars. Buying a car that is several years old will give you the opportunity to get more of the features you want at a lower price.
5. Do not be afraid to negotiate
It never hurts to negotiate the price of the car, especially if you notice any minor flaws. Most of the time, you can lower the price at least several hundred dollars by simply knowing the value of the car and being willing to walk away if the price is not right. This applies to both car dealerships and private individuals.
6. Use your old car for trade-in credit/ or sell it?
If you do not want to keep your current car there are options. Many dealerships will allow you to trade-in your old vehicle for a credit toward the new vehicle sale – some will even accept a trade-in for the down payment. However, if you sell it private owner you might get more money out of it. Some people do not want to take the time or energy to sell their vehicle, so they choose to trade it in.
7. Be aware of the entire cost
To save money when buying a car, it is especially important to make sure you factor in the entire cost. This includes the interest rate, extra features, insurance, and registration. Although it may seem you are saving money when you look at the monthly payment, you may be getting charged more once the interest rate is factored in. Most dealerships will roll it all into the financing minus the insurance. Remember when you finance a vehicle you must always maintain collision and comprehensive insurance coverage on the vehicle. If you do not the financial company will purchase insurance for the vehicle in their interest only (to protect the car) and charge you 3x more than if you had your own coverage. If you decide to pay cash you will also need to pay for any extra features, extended warranty, and registration costs.
8. Remain patient in your search
Starting your search with the mindset that you’ll drive home in a new vehicle that same day is one of the worst things that you can do when it comes to trying to save money when buying a car. It can lead to an impulse purchase, which is almost always synonymous with spending more money.
9. Compare financing programs
Just like different dealerships will have varying prices on their vehicles, you will find financing programs that are better than others. Plan on having at least three options to compare before settling on one.
10. Read the fine print on the loan
It is crucial to make sure you will not be subject to penalties for paying off your car faster. Paying extra on your monthly payments can help you pay off the loan early we paid a little extra when we could and ended up paying the car off two years early. So not only did we save money on the amount of interest we were going to pay, we also saved a monthly payment and now we have that as extra money each month to put to another bill or savings or whatever we choose to do with it.
On a final note, it is also important to go to the dealership with a plan. Know ahead of time the vehicle you want and the type of upgrades you are interested in so that in the excitement of buying a new car you do not allow yourself to agree to unnecessary up-sells and add-on packages. You will find it easier to save money when buying a car if you already have a well thought out plan in place.