Purchasing a car is the major decision, particularly for young adults. Especially, if you are new to the financing and credit world, check these tips before you settle buying your first automobile.
1. Avoid Car Lease
As you visit a car dealer, you will be shown few models out of your budget. It is the job of the salesman to upsell and so they explain leasing that makes a good financial sense.
Leasing sounds tempting as it features a low monthly cost in comparison to a new vehicle buying. Actually, in the long run it turns to be expensive. Yet, you must pay for a regular maintenance and fees can be charged in case the car is damaged. Besides, once the lease is complete, you have no account to show the few thousands of dollars you have given to buy this asset. Buying through car lease is acceptable only if you require a car for few years and wish to deduct as business expense the mileage.
2. Buy Used
Getting a new car is a special experience. It has the pristine seats, perfect industrial smell, a new paint job and the sparkle. But with few drives, automatically the value comes down and even a new car loses 11% cash value on sale. A new car will significantly depreciate for the initial five years and the resale value with its initial cost is just 37%.
3. Look for Other Financing Options
Most first time buyers get into buying an auto loan and mostly end up buying from the dealer’s lender. To be honest, some do not even know that they can get their own car loan. In fact, it is always cheaper to have third-party financing.
In you have a savings or checking account in a bank, you may ask about your auto loan options. You may contact local credit union for lower interest rates. It is best to shop before committing with different lenders. Remember, that the dealership will never offer the best terms, so look for other options offering better rates.
4. Read Carefully the Contract
Buying a car anytime means entering into legal agreement. If you buy through Craigslist or from car dealership, the binding is for sure in the form of an agreement. There is nothing you can do after the papers get signed and keys are handed.
Thus, it is critical to go through the sales terms. There may be extra features as car purchase. It may be declined originally by the buyer such as tire insurance or an extended warranty. First time buyers will be experiencing the first financial decision, so a careful reading of the contract is a must.
5. Negotiate the Price
Buying the car from a dealership, friend or a relative, you must negotiate. It will save you thousands. First, look for the value of the car online. Consider the mileage, current condition, and additional features such as a sunroof or tinted windows. Subtract 10 to 20% and use that as leverage.