Now is the Time to Buy a New Car
In these hard economic times, the decision to buy a new car becomes serious business.
We’ve all heard stories of money lenders not lending, of banks closing. We’ve all known people who have lost their jobs or had their paychecks otherwise cut. Maybe you’re one of them.
But if you are in need of a new car, then don’t shy away from making a purchase. Have fun picking out what you want and just enjoy the entire process, including showing off your new ride to the Joneses.
Here’s what we think about it. We’ve learned a lot about the economy in the past year. We’ve seen what happened to the people who financed homes that they really couldn’t afford. So one of the primary decisions you need to make is to buy a car that fits your budget. Be careful about which options you approve.
- In that spirit, evaluate the cost of anything extra before you add it on. Visit Edmunds.com to view price ranges for vehicles that interest you. Your monthly payment should be absolutely no more than 20% of your monthly net income.
- Know where your credit stands before you enter a dealership. It’s true you can get free credit reports from the major credit card companies, but you don’t get your credit score. You must pay a small price to learn that, and it’s worth it. Expect problems getting financed if your score is below 630 or if you’ve had a recent bankruptcy.
- You can initiate your own financing. Fill out an auto loan application at your local bank—you might get a lower interest rate. But if you’re suffering from a low credit score, keep in mind that the dealerships establish relationships with banks—sometimes the dealership guarantees to send customers with great credit to a specific bank, and in exchange that bank will occasionally approve a riskier customer.
- Finance it for the shortest possible time. People used to finance their cars for three or four years, on average. In recent years car loans have stretched out to five or six years. Try calculating your interest on a loan for that length of time, and you’ll see that you pay thousands more than you realize. Fool around with the auto loan calculator at bankrate.com. Sit down with your sales rep and figure out what your monthly payment will be for different lengths of time, at different interest rates.
- Ask the dealer about incentives for whatever car you’re buying. They’re not always openly advertised for one reason or another. Keep in mind you’ll probably get great incentives or a low interest rate, but not both.
- Buy an extended auto warranty from an independent provider like Warranty Direct to avoid paying the middleman markup costs. You don’t have to buy the extended car warranty from the dealership.
Life does go on, even in these severe economic times. The only way to wrestle this great country into moving forward again is to keep living: buy a home, plan a vacation, and buy a car. Think how much you’ll enjoy looking at your new auto sitting in your driveway!
Let us know what you pick out.
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Filed under: Buying a Car
the Auto Loan dealers on our place are giving us very expensive rates which we could not afford. we are still looking for better deals.`”,