How To Be Financially Smart When Buying Your First Vehicle Ever
When buying your first vehicle, it is important that you think wisely and play safely.
11:05 19 March 2021
A lot of research needs to be done, to ensure that you will not be led astray by overpriced deals and high-interest rates.
The question is: How can you become financially smart when you are about to buy your first vehicle? Do not worry, as the discussions below will guide you! You will know some efficient tips and tricks so that you will be able to go on the right path of your driving life soon enough.
10 Things You Should Know In Order To Become Financially Smart When Buying Your First Vehicle
1. Be Realistic On What You Truly Need
What do you need a car for? That is the first question you need to ask yourself. Will you use it for going to work? Will you use it for adventure and traveling only? What is the weather in your area? You should first inspect and evaluate your lifestyle and see what type of car you need.
Of course, it is always essential to do your research so that you will be able to see your options to choose from, especially the features that they contain- will it already work for you or not? A car's features are one of the major aspects that affect the car price after all. At the end of the day, just be realistic and be honest about what type of car you truly need.
2. Learn About The True Cost Of Owning A Car
Buying a car can be costly, but even if you buy an inexpensive, crappy car, owning one will cost you money. There is no doubt about that, it is like a little baby you need to take care of. You have to tend to its maintenance to ensure that it keeps working properly.
It can easily drain your bank account- from its loads of fuel that it is going to use, finance charges, depreciation, tires, licensing, and a lot more. Auxiliary expenses, such as vehicle insurance and routined repairs, are included. You will have more cash in your wallet by keeping tabs on your expenditures.
3. Know If Your Budget Can Contain Car Expenses
The first phase in the car-buying process is determining your budget, which is where many first-time car buyers mess it up. Many people make the mistake of assuming how much money they will spend rather than estimating the exact amount, which contributes to excessive spending.
To prevent this, you should think about every aspect of car ownership before adding it to your personal budget.
Gather copies of your most recent credit card statements and bills, as well as your mortgage, utility, internet, and mobile phone numbers. After that, create a spreadsheet with all of your monthly payments and split them into two categories: fixed and variable.
After you've completed your lists, add up the sums to get totals for each column, and add them together to get your overall expenses.
If you can't afford to spend as much money on a new car as you'd like, you might want to cut back on other expenses. Entering your revenue and expenditures into budgeting software is the quickest way to accomplish this. It can then display where you appear to spend too much money and make recommendations for new spending amounts.
If your variable expenditures are higher than the recommended amounts, you should reduce them. Set clear budget targets for such variable costs. You would also want to cut back on other small purchases. If you can make a few little adjustments here and there, go ahead and do so.
4. You Should Know Your Credit Score
The interest rate you owe on a car loan is influenced by your credit score. Better credit can result in a lower interest rate, which mostly will have an impact on your overall car-buying budget. Your credit card issuer might also be able to prompt you with your credit score for free.
Before you buy, you should consider checking your credit report and give yourself time to boost your credit score so that you have chances of lower interest rates if you are planning to apply for a car loan.
5. You Can Consider Getting A Car Loan
You would not have to make borrowing or financing decisions on the spot at the dealership because you will know how much you can borrow and at what interest rate you can get.
Since you are only paying a small portion of the overall vehicle price each month, having a car loan makes financial pressures more tolerable. However, remember to compare car loans first before deciding on one. When you are applying for a loan, it stretches the overall cost over a lengthy span of time, making it possible to pay for your vehicle.
That is why you should get the best rates when applying for a car loan.
6. Be Wise When It Comes To Shopping In Dealerships
A dealership's primary aim is to sell the cars it has on hand, which isn't necessarily in the best interests of the consumer. If the salesperson is knowledgeable about the inventory, he or she will try to fit the customer with something which can be sold right away.
If you are not really sure about what you want, the dealership will try to fit you into a car that it is attempting to sell, even if it is not the right and appropriate vehicle for you. Allowing yourself to be led astray is not a good idea.
A car purchase should not be taken on the spur of the moment. Know what the car you want to purchase is selling for, how much funds you can put down, and how much cash you can spend on a monthly car payment before you make a decision. You'll be well ahead of the majority of vehicle owners if you understand most of this long in advance.
7. Do Not Rush It
Many people find buying a new car to be a frustrating experience, so they want to get it over with as soon as possible, which can have negative consequences. They don't weigh their choices carefully or compromise skillfully in their haste to get through it.
Though salespeople will always try to convince you to buy right away, you can take your time. The car market in today's world is highly competitive, you do not have to fear missing out. There's no need to feel hurried by a limited-time deal. Chances are, an offer just as good, if not better, would be available the next day or another dealer will offer it to you.
8. Lay Down All That You Can
You'll want to lay a big portion of your money when buying a car. This is money you have set aside to bring into your car purchase. It decreases the total amount of money you'll need. It's also a smart idea to put down a large down payment wherever possible. This is attributed to two main factors: depreciation and interest rates.
Actual depreciation rates differ depending on the make and model. Longer-lasting automobiles will keep their worth well. On the other hand, depreciation has no bearing on you if you do not want to sell back your car and just want to drive it until the novelty has worn off.
However, if you want to resell it later, you must consider the depreciation costs. Bear in mind that down payment amounts will keep you ahead of depreciation and prevent you from going into debt. Naturally, the bigger your down payment, the smaller your loan would be. As a result, the monthly expenses will be smaller, and you'll pay less interest over time.
9. Do Not Forget To Test Drive
You will be spending a lot of time in your new vehicle. You'll also be spending hundreds of thousands of dollars on it. If you know someone who owns the model you like, make an appointment to test drive it. Check with the dealership if this isn't the case.
Before turning the switch, pay attention to as many details as possible, such as ease of entry/exit, seat comfort, leg- and headroom, exterior visibility, and how simple or complex the dashboard controls are to function.
10. Close The Deal After You Get A Fair One
You have done your homework, you know what you want, and you have already secured funding. When it is time to close the deal, you will be in command and willing to concentrate on reading your contract thoroughly.
To finalize the details, contact your lender and the dealership. Make sure you understand the repayment plan and interest rate before signing the contract, and that there are no hidden fees. Last, make sure you understand the terms of any lending or warranty arrangements before signing.
After you have driven away, it is recommended that you set up an automatic bill payment to ensure you never miss a car payment if you applied for a car loan, so you can concentrate on your next destination.
With all of these things in mind, you are now good to go. Happy driving!