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You’ve decided that it’s time to trade in your old car for a new one, but you’re having doubts about your ability to afford the payments. How do you know how much car you can afford? What are some mistakes that car buyers make when purchasing a new car? Know these tips before you even set foot on a car lot.
• Determine the total cost you can afford before stepping into a dealership. Car salespeople are trained to push a sale by making it seem affordable, even if it’s not. One tactic they use is asking a buyer for the amount they can afford per month, rather than a total budget. This way, a car salesperson can offer low payments, but the loan may be longer than the useful life of the car. Instead of thinking about how much you can afford in terms of a monthly payment, think in terms of how much you’re willing to spend on a car in total.
• Do you really need a new car? Vehicles begin to depreciate immediately, meaning you could get a great deal by opting for a car that is two or three years old rather than a completely new one.
• When you’re figuring out how much you can afford to pay for a car, remember to figure in any fees and taxes that will be added to the sales price. The total actual price of a car is typically about 20 percent above the sticker value after all of the extra fees and taxes are added.
• Figure the cost of maintaining a vehicle into the amount you can afford. This could even raise the amount you could afford, if you’re purchasing a vehicle that requires less maintenance or has significantly better fuel economy than your current vehicle.
• Many dealerships don’t require you to put money down on your vehicle purchase, but you should put as much down as you can. This saves you money in interest costs and lowers your monthly payments, making purchasing a new vehicle less of a financial burden.
Before you start shopping for a new vehicle, be sure that you can fit it into budget. Be aware of the total amount you can afford, and consider a slightly used car instead of a brand new vehicle.
