When Should I Buy A New Car
Whether you should buy a new car or a used car can be tricky. The answer is not always about your personal finances or the purchase price. Below is a breakdown of the possible reasons to buy a new car or a used car.
when should i buy a new car
There are a few reasons why you may want to consider purchasing a brand-new car. For one, you'll likely receive the latest and greatest when it comes to safety features. This could potentially reduce your auto insurance premium. It could also provide peace of mind, especially if you have a family or young children.
You should also consider how long you expect to have a car. For instance, if you tend to trade in a car every couple of years, you may always be covered by a manufacturer's warranty. This means that you may save on maintenance costs.
A car payment is right up there with a mortgage and student loan payment as one of the most costly monthly expenses. Taking on a car payment can be overwhelming, especially if you haven't done so before. Below are some tips to help you save money when purchasing a car.
You may feel pressure when buying a car, but you should still practice patience and find a loan option that's right for you. Compare rates from dealerships and lenders. If you don't like the rates you're seeing, consider improving your credit score.
A good way to fit a car payment into your monthly budget is by keeping your required payment low. Your monthly car payment will include interest and principal (the amount you borrowed to pay for the car). So, in addition to getting the lowest interest rate possible, you should aim for a low principal amount.
You should be very mindful of what your monthly payment will be with the current interest rates, and make sure you are not getting in over your head. Four-year car loans are currently averaging about 5.5 percent interest rate for new cars and about 6 percent for used cars. The average monthly payment has grown to $738 per month, according to Kelley Blue Book.
"The single best advice I can give to people is to get preapproved for a car loan from your bank, a credit union or an online lender," says Philip Reed. He's the autos editor at the personal finance site NerdWallet. He also worked undercover at an auto dealership to learn the secrets of the business when he worked for the car-buying site Edmunds.com. So Reed is going to pull back the curtain on the car-buying game.
And shop around for the best rate. "People are being charged more for interest rates than they should be based upon their creditworthiness," says John Van Alst, a lawyer with the National Consumer Law Center.
"Concerning the extended factory warranty, you can always buy it later," says Reed. "So if you're buying a new car, you can buy it in three years from now, just before it goes out of warranty." At that point, if you want the extended warranty, he says, you should call several dealerships and ask for the best price each can offer. That way, he says, you're not rolling the cost into your car loan and paying interest on a service you wouldn't even use for three years because you're still covered by the new car's warranty.
Reed says a colleague at NerdWallet actually bought a minivan recently and "when she got home, she looked at the contract." She had asked for a five-year loan but said the dealership instead stuck her with a seven-year loan. "And they included a factory warranty which she didn't request and she didn't want." Reed says she was able to cancel the entire contract, remove the extended warranty and get a rebate on it.
"But the point of it is," he says, "I mean, here's somebody who is very financially savvy, and yet they were able to do this to her. And it's not an uncommon scenario for people to think that they've got a good deal, but then when they go home and look at the contract, they find out what's been done to them."
"The golden rule is that all of your car expenses should really be no more than 20% of your take-home pay," says Reed. And he says that that's total car expenses, including insurance, gas and repairs. "So the car payment itself should be between 10 and 15%."
A new car is cheaper when it costs you less in installments and maintenance than a second-hand car. But it?s not just about the actual money spent. It?s also about your own emotional wellbeing knowing your car isn?t going to overheat and flake out in traffic every Monday morning.
Buying a car is a serious commitment. While it may be a depreciating asset, which means that the car value decreases over time, it should still make sense in the long run. A good car will have more than just great horsepower and top speed. Great attributes to look out for include:
First off, know when to buy a new car and when is the right time to go to a car dealership. Try towards the end of the year when everyone?s trying to close those final sales for their year-end commissions. But that?s not the only reason you want to go towards the end of the year.
Before you even head out to the dealership you should know what your credit score is. A good credit score is a great bargaining chip for a good interest rate. When you feel like the rate offered isn?t as good as it can be, then it?s time to shop around.
A car should be viewed as a worthy asset and as such, it?s worth doing the math to make sure your money is not just flying out the exhaust. A new car is not the financial burden it?s made out to be when you do the homework and buy responsibly.
A few counter-arguments here... When buying a new car, most people assume they will drive the car for 5-8 years. This hardly ever happens. Ego and increased affluence are the primary reasons. People have a hard time staying in their 6 year old post-college Honda when start making good money. Also, you forget that things happen to cars over the years...things that can vastly increase your desire for a different car. Most accidents don't total cars, they just cause reoccurring problems. True, this can happen to any car new or used, however it's alot more painful in year 1 of your 5 year loan than 3 years after you paid cash for a used car.
It is no secret that vehicle troubles are less than ideal. The worst-case scenario for many drivers is finding themselves with a blown engine. So can your engine problems be repaired? Is an engine replacement worth it? Or should you invest in a new vehicle? The mechanics at Chapel Hill Tire are here to answer all of your engine replacement questions.
Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.
Wealthtender, Inc. does not provide and does not intend to provide investment or legal advice through this website. Information contained on this website is for informational and educational purposes only. Third party links and resources are provided for your convenience, and have not been independently verified by Wealthtender, Inc. Wealthtender, Inc. is not responsible for the accuracy or viability of the information or services offered through third-parties. Inclusion of links to third-party content is not an endorsement by Wealthtender, Inc. of such content or services. Use your discretion. To make Wealthtender free for readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. We earn a nominal monthly fee from financial advisors and firms in exchange for providing access to the benefits described on this page, subject to these terms. This compensation creates a conflict of interest when we favor their promotion over others. Wealthtender is not a client of these financial services providers.
Any car will require a certain amount of regular maintenance to keep it in good condition, but sometimes that maintenance gets more expensive the newer the vehicle is. For example, if you are wondering if you should keep your old car or buy a new electric or hybrid vehicle for the increased fuel economy, the maintenance on that new hybrid car will be much more difficult and expensive to do. In some cases, you will even have to take it to a specialized repair shop or mechanic that works exclusively on these types of vehicles.
The question of whether you should buy a new car or keep your old one running is not just a financial one. It is also about your time and the amount of effort you will have to expend to get ahold of that new vehicle. Depending on your schedule and the amount of mental bandwidth you have, it may not be worth the trouble.
With proper, regular maintenance to help minimize any excessive wear or corrosion, there are many cars that can last longer than 20 years. However, there are a few things to consider when deciding whether a 20 years old car is too old. For example, if the transmission slips in and out of gear, engine oil continually leaks or the vehicle has issues with any vital safety features, such as your airbags, the car is probably too old to continue driving safely.
As a financial advisor we come across such cases multiple times.Fortunately,there is a basic rule one can follow to buy a car i.e.,20/4/10.20 stands for the down payment.One should be ready with 20% of down payment of the on-road price of the car.4 stands for loan tenure,it should not be beyond 4years.Nowadays banks offer loan for 7years to reduce the monthly EMI and to optimize the eligibility to give the car loan.0 stands for all your expenses related to that car like EMI,Insurance,maintenance,fuel charges etc.Let us break this down to get a better clarity.If the on-road price of the car is 20lakhs then one should be ready with 4lakhs as down payment so that the loan is not a burden on you.
One has to ensure that only up to 10% of the family annual income and annual expenses towards that car should be considered.Bad planning can affect the future outflow of expense and can save you from taking immature financial decision.
No one can stop you from buying your dream car.Another strategy to choose the dream car is to follow the goal-based planning mechanism.The key here is to maximize the amount for the down payment so that the EMI and other expenses are intact by owning the dream car. A lot of premium car owners get fascinated with the materialistic pleasures and in few years, they sell the car.The summary of one of the automobiles research highlights that the resell percentage of premium cars are high because of the society pressure.The core reason behind this is the myopic view meeting financial goals and poor decision-making skills.It is vital to consider the current,future income plus expense to decide on selling the car or to rework on the EMI payments so that recovery of the opportunity cost is taken care off.Since it is a large purchase,one should carefully consider all the factors to take a favorable decision. 041b061a72