The decision to buy a new car often accompanies positive life changes; graduating from college, having a baby, or receiving a promotion are all great reasons to upgrade to a new vehicle. However, you must be careful to avoid these five mistakes that could put a damper on this exciting time in your life.
1. Deciding too quickly
You see it there on the lot: your dream car - The perfect vehicle. It has everything you want, and for a great price, too! However, this vehicular fairytale can be dangerous. Car salesmen will try to convince you that they have the best deal you could possibly get, but chances are they’re lying. You can always negotiate. Bargain and haggle hard, and don’t settle until you’re satisfied with the price.
2. Using dealer financing
Obtain a loan for a new car from a bank or other trusted source, not from the car dealership. The amount you'd pay in interest could possibly buy you another car; dealer premiums are often high-interest with harsh penalties for missing a payment, so avoid them at all costs. Get pre-approved from another source before you begin shopping.
Even if you feel that there is nothing wrong with a car, take it for a test drive. Make sure everything is in working order and that it like the way it feels; the moment you buy a car, it depreciates in value. There are no returns. Take it for a drive on the open highway and through heavy traffic, testing out the brakes, steering, and all other relevant features.
3. Negotiating in person
The dealership is the salesman’s home turf. Do your comparison shopping online and find out where you can get the best deal. Keep an eye on the average price for the model you are looking for. If you can negotiate over the phone or through email, you remain in control of the conversation, rather than running the risk of being caught up in a salesman’s charisma and charm.
4. Buying "because you can"
Just because you can afford to make the car payment doesn’t mean you should. Shop conservatively; find a car that suits you, even if it is under your estimated price. This just means you can put down more money towards the initial payment and have it paid off sooner.
A few more tips that you should keep in mind are as follows-
- Buy new car instead of used car - If the borrower is getting a car financed with a low or no down payment then there is a chance that he will go upside down on his auto loan later on. This is on account of the depreciation in car prices. Top that effect; it could be advisable to opt for buying a new car instead of an older vehicle.
- Take advantage of the internet- By going online, a probable applicant can get valuable information pertaining to different car models, their reviews, features as well as their prices. Hence, before taking a test drive, the borrower has the opportunity to decide which car is right for his circumstances. In addition, once borrower selects a vehicle, he can also get details of VIN and car's past record online.
- Think of monthly payments, not price - Instead of worrying about how much the car will cost, it is imperative for a borrower to think what the monthly car installments will be like. It further implies that the most crucial factor which affects the overall affordability of the car loan is the interest rate and the loan repayment term. Applicant must weigh his options in finer details.
- About buying add-ons from dealerships- Most of the car dealerships provide add-ons or optional features such as stereo system, security alarm, tinted windows, etc. at an extra price. The charges for these features are often inflated thereby raising the car prices. Additionally, these items don’t increase the market value of cars in any way, so borrower must determine beforehand whether he actually needs these features.
- Purchasing a car with dealership financing - It could be advisable to stay away from car loans that are arranged by auto dealerships. This is because the rates of interest offered by lenders that work with dealerships could be extremely high apart from the fact that the repayment terms are also inflexible. Borrowers could end up spending more money on interests if they opt for this option. You should also know the car warranty period and the perks provided by the company for your car during this period.
Purchasing a car is a big decision and an even bigger commitment. Payments will come out of your bank account each month, so make sure you are smart when you make the purchase. If at any point during the transaction you feel like you are being cheated, question the salesman. Negotiate the price down or walk away. You are in no way obligated to make a purchase.