Five Questions You Must Ask Yourself When Buying a New Car
First, Congratulations! 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 Bank of St. Louis, in March of 2017 the average amount financed per automobile loan was $29,133.85 and a growing average interest rate? While the majority of vehicles are financed for 60-month terms, it is now estimated that 20 percent of auto loans are financed for 72 to 80 months.
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 purchase 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 it cost to service a vehicle on average and 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 at least $250 per month that you can reasonably afford and stick with it’s likely 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.
Do You Have Questions About How to Save Money When Buying a New Car?
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