Congratulations on your decision to purchase a new car!
Buying a new car can be exciting and rewarding. We have put together a guide to help make your purchasing experience a satisfying one.
Did you know that according to the Federal Reserve Statistical Release in February of 2010 the average amount financed per automobile loan was $28,040 with an average interest rate of 4.72 percent. Those loans mature at an average of 62.5 months, or a little over 5 years.
These numbers reinforce the fact that the car you buy today will impact the money in your wallet for years to come.
This guide will provide you with information that may help save you thousands of dollars over the next several years, especially if you plan on financing your vehicle through a bank or finance company.
Here are five initial things to ask yourself, and perhaps write down the answers to, once you’ve decided to purchasing a vehicle.
- What will you primarily use your vehicle for? (Ask yourself if you feel your needs will change over the next few years.)
- If you plan on financing your vehicle ask yourself how much of your monthly income can you reasonably spend? (We recommend not financing more than 15 percent of your total monthly income on vehicle expenses. Vehicle expenses cover your fuel, finance payment and insurance)
- How does your credit report look? A healthy credit report will typically lead to lower interest rates. If you need to review your credit report you may go to www.AnnualCreditReport.com for a free copy of your report from the three major Credit Reporting Bureaus.
- New cars are known to depreciate in value quickly. Will you be buying a new vehicle or a used vehicle? Are there models that have grabbed your interest? Take a look at recent Kelly Blue Book values in order to get a sense of the depreciation that model may come with.
- Research the particulars such as what type of fuel economy are you looking for, how much does servicing the vehicle cost on average, what type of insurance rates will you be offered. By looking at other long term cost associated factors you may find that the model you initially wanted carries a much higher overall cost than other comparable models.
By taking the time to ask yourself these questions before you go shopping for a new vehicle you hopefully will have an idea of what you are looking for and what you are willing to spend. This helps put the ball in your court when you are looking at financing because you already have set perimeters.
If you find you have $250 per month that you can reasonably afford and you stick to it you won’t find yourself in the uncomfortable position of struggling to make your monthly car payment.
Also, remember that there are many dealers who want to sell you a car. So take your time. Price out several different options and choose the one that works best for you.
Our next blog post will discuss which car is best for you in more detail and what to do if you are trading in a vehicle.
If you have any questions, would like to discuss your financial challenges, or are just looking for advice, please call us at your convenience. As always, we are here to help and look forward to hearing from you.