Looking for new a car should be fun. Unfortunately, this can easily changeif you approach the process the wrong way. Here are a few tips to make sure your next decision to find a vehicle, is an enjoyableprocess.
1. Do Your Research
a) New Cars Vs. Used Cars
Don’t be quick to dismiss either of them.
Consider depreciation. A car loses nearly 20% of its value as soon as you drive it off the lot. This moves to 30% by the end of its first year of ownership. If you buy a new car for $20,000, two years later it would be valued at $9,800. Depreciation alone would have cost you $10,200. If you purchased a 2-year-old used model of the same vehicle at around $10,200, your depreciation expense after two years would be $ 5,398. One could argue that the maintenance and reliability cost of a new car is much less compared to that of a used car, so this makes up for the price difference. Then again any vehicle, new or old, needs service. Of course, a used car would need more frequent sessions because it can’t travel as far as a new car can before it’s due for a checkup. Either way, it does not hurt to weigh both options before you make your decision.
b) Look AroundBefore You Decide
If the need to find a vehicle isn’t urgent, spend as much time as you can on this step. The internet is a great source of information. Read up on specific car features, invoice prices, sticker prices etc. Visit different dealerships before you make up your mind, then you’ll have an idea of what is out there. Many of them have newsletters detailing discounts or special offers. Consider signing up for these so you don’t miss out. Put in a request to be emailed quotes on the vehicles you are interested in, then you can do your own price comparison as part of your research.
2. Budget and Financing Options
Regardless of whether you plan to use alternative financing options or pay cash upfront, make sure you have a realistic budget that factors add-ons and insurance costs into the final price of the vehicle.
As mentioned earlier, cars depreciate very quickly, so upfront cash payment, if possible, can save you a lot in the long run. The last thing you want is to be stuck paying monthly payments that were calculated on a purchase price which is nowhere near what the car is valued at today.
If you are looking for a high mileage beater that can take you from point A to B, you’re better off paying cash. In fact, cash may be the only option you have since financial lenders have limits on both the age and mileage of vehicles they are willing to finance.
However, if you’re looking to buy a vehicle that will lastyou several years, consider a newer model with lower mileage. In this case, you will most likely have alternative financing options available to you. The higher your down payment is, the better. This would mean a lower monthly payment.
3. Test Drive
You have done your research on the car you’re interested in, and even come up with a budget. Now you have a good idea of the kind of vehicle you want and a price range you are comfortable with. Plan to test drive your options.
Your first instinct may be to power on the engine and drive off, but take some time to do a walk around. Inspect the outside of the car before you get in. Examine the condition of the different compartments, like cup holders and storage compartments. Test out the back seats and see how much room occupants have, how comfortable the seats are and even how the doors open and close. Look at the safety features: airbags, seat belts etc. and confirm they are in good working condition.
It’s a good idea to bring someone else along, just in case they catch something that you otherwise would have overlooked during the test drive. Test the car both during the day and at night.
Remember the research you did earlier on car prices? There’s always room for negotiation. Cars have an invoice price, which is the price that the dealer paid for the car and a manufacturer’s suggested retail price (sticker price), which is the amount that the dealer wants you to pay. During negotiations, the dealer will most likely use the sticker price as a starting point. You, the buyer, should start off from the invoice price.
Don’t feel the need to rush the car buying process, especially if it is not an emergency. Take the time you need to do your research, improve your credit and even save up before you finally sign the paperwork and drive off!