Buying a new car is a big investment, often an individual’s first major investment. It is also most people’s foray into unknown financial territory.
Talk to most people who recall purchasing their first vehicle and chances are there are probably many things they wish they had known or been told before making the purchase. Doing your due diligence and taking time to source out the best value possible takes some time and effort, but will pay dividends once you’re off the lot.
Here are 5 tips for buying a new car:
Know your budget.
A car is not just a one-time payment. Driving and maintaining a car is a monthly expenditure and as such, your budget should be based on what you can afford to pay on a monthly, ongoing and like long-term basis. Come up with a list of potential costs such as maintenance, gas, winter tires, licences, insurance, financing interest rates, and permitting to help you better understand what I car will costs you each month. Once you have made this list it is important to find out what these costs will potentially be for the vehicles you are considering.
It is important to remember that different cars come with different costs and it is important to look at both the initial price of the car as well as the long term costs when making a decision. A car, in addition to the purchase price, can easily cost $20.00 – $50.00/ day to maintain, licence, and operate. This can add up to several thousand dollar every year for which you may not have initially budgeted.
Be honest about your transportation needs.
Are you going to be relying on your vehicle simply as a method of getting from point A to point B, or is it part of your livelihood? If you get something that has certain fuel quality requirements, are you going to be able to shell out every time you fuel-up? Do you need to own a vehicle? If you only need it for small weekend trips or in the event you need to haul or move something heavy, perhaps simply renting a vehicle short-term or joining a car-share program is a better idea.
Do your research.
The internet has really democratized the ability to make informed decisions. There is an almost endless supply of information (good and bad) about manufacturers, models, dealerships, contracts, pretty much every component of the car buying process you would ever need to consider. Spend some time reading about the car you are interested in and get thoughts and opinions on forums/blogs from previous and current owners. The time-honoured tradition of the test-drive is also still a good idea. Also remember to evaluate your sources and look for up-to-date, unbiased, and researched information.
Determine the fair purchase price.
There are innumerable price comparison sites and apps available that let you determine what people in your area, driving the same or similar cars, are paying for the model/make that you want. Having this information when negotiating with a dealership or a salesman means you don’t have to settle on a price that you think is unreasonable or above market value.
Understand your financing options.
The ways in which credit and other financial institutions, even dealerships and manufacturers, have evolved to make credit available to car buyers is astounding. If you have good credit history, it is usually quite easy to secure credit for the purchase of a new automobile. Knowing how much you can take on and the method of borrowing and repayment that works best for your budget requires shopping around. If your credit score is impaired it may take more leg work to ensure a lender is not taking advantage of your situation. Remember to read all of the loan documentation especially the overall cost of borrowing and be wary of any promises of future drops in interest rates if they are not in the contract. You should always evaluate your ability to afford the vehicle based on the contract provided and feel free to ask questions if you don’t understand.
Buying a new car, as daunting a task as it seems, has never been easier. The old days of trying to outsmart the crafty used-car salesman do not really exist anymore thanks to the arsenal of information that new car buyers have at their disposal before making a purchase. Spend some time studying up on what you want, how other people have gone about acquiring it and their thoughts on ownership and you will end up making the best decision possible.