In the US, a car is much more than just a way to get from “A to B”, it is the star of your local tailgate party, how the best family road trips are made, and helps your child move into their college dorm. Whether you are considering buying your very first car, or a replacement for your old one, getting a shiny new ride is incredibly tempting for any driver. Nevertheless, many Americans make mistakes when purchasing a car that end up costing them in the long run.
But don’t fret—Briteside Solutions is here to help. Here are some tips to help you be a savvy shopper when choosing your next set of wheels.
1. Come Pre-Approved for a Loan
Do you know your credit score off the bat? How much of a car loan can you financially afford?
These are some big questions that need to get answered before you ever step foot in a dealership.
Getting preapproved for a car loan from your bank, a credit union or an online lender might save you thousands of dollars down the road—and how you may ask?—by helping you understand and negotiate your interest rate, and allow you to boost your credit score.
Getting preapproved by an external lender from your car dealership offers the following benefits:
- Identify and rectify any problems with your credit before you start shopping
- Gives you a baseline for your budget
- Helps you avoid being charged more for interest rates than you should be based upon your creditworthiness
The preapproval process allows you to take back control of the wheel, and bargain down your rate rather than accepting an overinflated one without realizing it.
2. Keep the process as simple as possible
Only focus on one thing at a time when you are buying a car from a dealership. Also refrain from discussing too many details with the salesperson up front, because the more complex the situation gets, the harder it will be for you to keep control of the deal.
Feel free to walk away from the dealership or buy the car at a good price without trading in your old car if you think that they are lowballing you on your trade-in. There are plenty of other options available to you these days to get the best value for your money.
3. It’s OK to buy used
Remember the 50/30/20 rule we discussed last month? Just like all expenses, It is wise to budget out how much you can allocate towards car expenses every month. The golden rule is not to spend more than 20% of your income on your car, including insurance, gas, and maintenance. This means the car payment itself should not exceed 10% to 15%.
A new car loan may not work out for your budget, so if you crunch the numbers, you may decide you don’t need a new one just yet and hold off.
If you might not be able to afford a shiny new car, that does not mean buying a car is off the table. The reliability of used cars is remarkable these days, and since so many get traded in after only 2-3 years, you can still get a lot of miles out of a pre-owned vehicle for the fraction of the cost of a new one.
It can be stressful trying to make sense of a complex purchase, like that of a new car. With Briteside Solutions, we strive to empower consumers and make them personal financial experts. If you need financial advice so you can make your dreams of car ownership a reality, contact us today to get started.