While car shopping probably won't be the biggest investment you will ever plan for, it is likely one of the more expensive purchases you will make, besides your house. So, before you explore your options online or head to your closest car dealership to make an offer, learn about the five B's of car shopping, created to help you make a smart choice for your situation...and your finances.
1. Budget - Budgeting for a new loan payment or an adjusted car insurance bill is a very important step in the car shopping process. When creating your budget, you should not only establish your goals but be sure they're realistic so you can comfortably live within your budget as much as possible. The average consumer spends approximately 11 percent of their gross (before taxes) monthly income on a car payment. In addition, most experts advise that consumers keep their car payment to under 20 percent of their monthly net (take home) income. Also, figure out how much you expect to get for your existing car if you plan on trading it in for your new one. Knowing your trade-in value can also help you stick to your budget because you'll know how much you should receive when turning your old vehicle in. Also, understand that if you're trading in your beloved beater for a brand new set of wheels, you should expect your insurance to significantly increase. All these variables may also play a part in how much you can put down as your deposit or how much you can comfortably afford month to month, so set a realistic budget and refer to it often because a budget doesn't help unless you follow it!
2. Baggage - Whether you're trying to find a car with room enough for all your cargo or large enough to fit all of your children and their friends, you should consider how much "baggage" space you realistically need before settling on a specific car. For example, if you currently have no children but think you may start a family in the next few years, you may want to consider a car that will be able to accommodate the extra baggage that comes with an addition or two to your family. There is nothing worse than having a car that's too small to comfortably seat yourself along with the baggage you haul around. Also, think about whether you may need a car that's able to tow a boat, a motorcycle or even a camper. While you may not own this recreational equipment now, you may in the future, so pick a car that will accommodate these capabilities in the future. Above all, choose a car that fits your family size as well as your lifestyle.
3. Buy or lease - Once you set your budget and determine your baggage needs, your next step is to decide whether it makes more sense for you to buy or lease. There are many advantages to buying a car including the fact that buyers usually enjoy more negotiating power because the seller's commission is often higher than with a lease. Your insurance premiums may also be lower and most importantly of all, once you've finished making your payments, you will own the vehicle outright.
4. Barter - Not only should you look for a bargain when car shopping but you should be ready to negotiate to get the price you think you deserve, whether it's at a dealership or an online posting. Part of the fun of car shopping is the negotiating power that you suddenly have. But do your homework and be sure to understand what a reasonable price is before making an offer. If you're looking into a used car, make sure you refer to Kelly Blue Book and other online resources as you make your decision. There's nothing worse than starting negotiations without doing the proper research, and having the dealer or seller frustrated with your unrealistic offer right of the bat. And remember, negotiating is about giving and taking, so be sure that you're willing to give a little to, as long as you keep your budget in mind. For example, you may be willing to forgo a moon roof if it means you have an iPod hook up, so be sure you understand what you can negotiate and what may be harder to do without.
5. Borrow - And lastly, finding the financing you need to pay for your next car purchase doesn't have to be a daunting experience. It is important to find the lender than can help you pay less on the money you borrow. So, be sure to thoroughly research your options. For example, if you want longer terms, you may not be able to secure the lowest interest rate available; but if you're willing to agree to shorter terms, you can expect to receive a more attractive rate. Most leases and loans are for 36, 48, 60 or 72 month periods, so do the math before you decide the financing that's right for you. Also, learn about companies like Nationwide Bank that offer flexible new auto loans and used auto loans to help you get on the road in no time. They also offer great auto refinancing rates if you decide to stick with the car you already have. Refinancing is a great way to save money on your existing loan. Whatever you decide, find the attractive interest rate that you feel comfortable with and apply today.
And while you're at it, don't forget to request an updated auto insurance quote.
Jessica Penick is a senior content specialist at Rosetta, one of the top 10 interactive agencies in the country. Penick has a degree in English/Creative Writing from Cleveland State University. In addition to her traditional copywriting background, she also has valuable experience in the search engine optimization field. Originally from Cleveland, OH, she has also lived in London, England, as well as Tanzania and Uganda in East Africa.
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