Planning on buying a car this year? Don’t rush. By taking note of the following tips, you can’t go wrong in your car purchase this 2014.
1. Know how much you can afford.
You may have a specific car in mind, but are you sure you can afford it? Finance experts say that your expenses for a car should not be more than 20% of your monthly take-home pay. This amount includes not only syour car loan payments but also operating costs like parking fees, gas allowance, car insurance, and maintenance and repair costs.
2. Choose carefully between new and used.
A lot of car shoppers, especially those buying a car for the first time, get confused when choosing between a new car and a used car. Both have their own sets of advantages and disadvantages. The key is to weigh the pros and cons of each to determine which will benefit you more in the long run.
Over the past year, used cars have been in demand. This caused prices to go up. In that case, you may want to consider getting a new car instead for this year. However, new cars are generally more expensive than used cars. In any case, your decision should largely depend on your budget.
3. Get to know your shortlist.
If you have listed down some car models that you’re considering to buy, take a good look at your list before walking into any dealership. Start researching about each car online. Here’s how:
- Start by visiting the auto manufacturer’s website to check out the features of the car. Does it have the features you need? Is it available in your area?
- Take note of the manufacturer’s suggested retail price or MSRP and the invoice price. These pieces of information will be really helpful when you negotiate with a dealer.
- Keep all the information you will get.
After doing your homework, don’t rush into a dealership yet. There are a few things you would want to do first. Continue reading.
4. Do some math.
If you hate math, this tip may not sound like a good idea to you. But don’t worry. We’re living in the modern age where a simple online program can do it all for you. Websites like Edmunds.com, KBB.com, and Bankrate.com have different kinds of auto loan calculators that can really help you. For example, the calculator in Edmunds.com can assess for you the total amount you’re likely to pay for owning a certain car. This figure is an important factor to consider when deciding whether or not to purchase any of the car in your shortlist.
5. Find the best interest rate.
Notice that we’re not asking you to find the lowest interest rate but the best. Why? Low does not necessarily mean cheap and legitimate. We’ve all learned that (We should!) from last year when new schemes of auto loan scams were revealed. So how do you find the best rate?
- First of all, apply for an auto loan with the best credit standing you could get. If your credit is damaged, try fixing it first.
- Make dealership financing your last resort. If you have been reading the news, you’d know that the CFPB has been warning consumers about dealership markups which increase interest rates significantly. Go to banks and credit unions instead.
- Monitor current auto loan rates. A great source for this is Bankrate.com.
- Take the cash rebate and use it as part of your down payment.
6. Negotiate shrewdly.
At this point, you should have already arranged financing for yourself, because in that case you wouldn’t have to talk about financing at the dealership. You can focus on the car price which is the first thing to negotiate. You should know at least two things when negotiating for a lower price: the invoice price and the discounts you can claim.
The invoice price, which we have mentioned in tip #3, is the amount the dealership paid the manufacturer for the car. The price you would see at the dealership is most likely marked up. You know, dealers need to earn extra dollars to keep the dealership running. However, this markup could be too much. The purpose of knowing the invoice price, which is available online, is so you know how much room you have in haggling for a lower price.
You should also know about all the discounts available for the car you’re buying. Customer incentives are a form of discount. But automakers also have special offers for certain kinds of buyers like students and military service members. Don’t forget to bring up the discount at the dealership especially if you are so eligible for it.