Buying a car is a big deal.
We can help you understand the financial steps to take before buying a car.
Buying a car is considered the second largest purchase you will make in your life, which comes with important questions and considerations.
Understand your budget
If this is your first vehicle, make sure you know what you can afford. Get started by creating a budget.
If you currently own a vehicle but want to upgrade, save up for the difference in cost your new vehicle will be. It is best to not buy a car before your current vehicle is paid off. Instead, while you are paying off your current car, set aside the money that used to pay for your monthly car payment in an interest-bearing account for one year. An interest-bearing account is a place where you keep your money while earning interest on the deposits you make.
Strong credit rating
Your credit rating should be considered when creating your budget. Credit ratings can be the deciding factor on whether you're able to lease a car or not. Identifying how you can improve your credit rating early on, can help support you in successfully leasing a car.
Insurance and maintenance costs
The cost of insuring a car is a significant factor in the overall cost of a car and should be considered before purchasing. For example, if you are looking to purchase a sports car, it is worthwhile to know the higher premiums that come along with it (as opposed to other conventional vehicles).
Likewise, car maintenance costs can vary from vehicle to vehicle. How much do your vehicle's tires cost to replace? How often does your car need to refuel? How often will it need an oil change? These are questions you want to keep in mind when choosing a vehicle.
Research your options
When you arrive at a car lot knowing what you want, you are setting yourself up for success. Always research your options beforehand. You can try using Google or simply asking friends and family what their vehicle preferences are. Once you know what kind of vehicle you want, start researching what a fair price looks like for it.
You may decide to buy a used car instead of a new one. In this case, researching the recent resale prices for the specific car you want can be very valuable. If the car you want is over the recent resale price, you can try bargaining with the dealership or private owner for a better price.
You may be eligible to receive a loan for the car you want. The process starts with a loan interview and finishes with an approved application. In a loan interview, an advisor will cover the following information with you:
- Income — Bring pay stubs and a notice of assessment for last year's taxes to confirm employment.
- Your Vehicle Preferences — Dealer? Provide the purchase agreement and name of vendor. Private seller? Provide a VIN (vehicle identification number) if possible.
- Credit History — Explain any discrepancies you may have.
- Budget — Explain your budget and whether there will be a co-signer of the vehicle.
Shopping around means checking out more than one dealership or seller. You may approach your dream car in one place, however, shopping around can expand your options. You may realize that your preferences of a vehicle change.
Make the deal
Purchasing a new car is one of the most important investments you will make in life. In fact, if you choose to lease a car, you could be spending four or more years paying it off. Your top priorities should be to negotiate the car loan and decrease the purchase price.
Leave feeling within your budget and confident you received the best deal on your investment. Enjoy the ride!