Owning a car is enthralling. But you should be vigilant not to lose your hard-earned money. A car is your second largest financial transaction after housing.
The process of buying a car- whether old or new- can be daunting. It’s also a risky process since con men are still at large.
Not sure where to start? Don’t worry. Here’s a guide to make the process seamless and effortless.
So, what are the smart moves to take when buying a car?
1. Get Sufficient Capital
The best decision is to be preapproved for a loan from a credit union, bank, or a reliable online lender like Plenti. Getting a car loan from a lender will make you critically think and question if you can afford the car you want.
You need to decide before the car dealership convinces you to take a huge loan for their target vehicle. Getting a preapproved car loan reveals any issues with your credit score. This will help you build the credit score before shopping.
Also, ensure you shop for the best rate. Car dealerships always jack up the rates by offering you more than you qualify for. Based on your credit score, you may be eligible for 5%, but the dealership might hike the rate up to 8%.
If you fall for that deal, you’ll end up paying thousands of dollars.
Getting a car loan with credit union financing or a bank is easy. Sometimes you can negotiate interest rates, meaning you can pay less. If you have a mortgage with your bank, your interest rate might get lowered.
2. Never be Desperate
Being desperate is a surefire way of losing your money. When you appear desperate, conmen find easy prey. This usually happens when you want a quick fix.
Take things slowly and be in control. You might need your car urgently, but don’t allow the car dealership to know your intention. This way, you’ll even have time to negotiate for a better deal.
Being calm and relaxed helps you in making an informed decision. Visit various dealers as you sample the prices. Google their offers and read reviews to ensure you’re dealing with a reliable car dealer or money lender.
Never be in a hurry to purchase a car. Take your time to find the make you want, check specs, and determine if your money is enough to take home the dream car. A period of three to four days is enough to figure things out and land a good deal.
3. Consider Various Options
Now that you have a preapproved loan, you can easily choose the car you want. The cash-in-hand will determine the model and engine capacity you need. But as you choose the vehicle, don’t forget to check the features.
4. Keep It Simple
Salespeople at the car dealership like it when a client seems confused. So at the dealership, ensure you focus on one thing at a time.
First, start with the cost of the car you want. The salesperson will be open to you. Avoid buying when the price is staged at the dealership. This makes the game complicated for them. If you negotiate a great deal, they might increase the rate to make extra money.
But you can do a little research online and check the pricing guides from other reliable dealerships.
5. Beware of Longer-Term Loans
Most car loans spread over six years, which is a dangerous trend. When you get a 7-year loan, you’ll pay the lower monthly payment. Sounds good, right? But with a long-term car loan, you’ll end up paying more cash in terms of interest.
If you do your math, the interest will be more than the principal amount. And sadly, most people don’t realize this.
A vehicle is a depreciating asset. By the time it’s five years, it will have lost 25% of its value.
And if you have a long-term loan, you’ll not have paid for it. This will make it hard to sell the car. And remember, interest rates may fluctuate over time.
6. Buy Used Car to Save More Bucks
Buying a new car means getting a warranty. New vehicles are also fitted with the latest technology. They also have lower emissions and better gas mileage.
However, the vehicle depreciates the moment you drive it off the dealership.
But a used car has already gone through the first depreciation phase. You can resell the car pretty fast without making a loss. More so, you can get a zero-interest loan from a credit union or your bank.
The Bottom Line
Buying a car requires you to think smartly. The golden rule is to ensure you’re able to clear off the loan in three years. And if you cannot manage to pay within this period, it means you cannot afford the car.
With some research and leveraging these six tips, you’re likely to get your dream car seamlessly.