Owning a car is now more than just a want or a luxury. In fact, it’s now considered as one of the best ways to survive the time-consuming demands of public commuting. Because of this, it’s crystal clear why so many individuals, young and old, single or with familial obligations, are deciding to buy a car.
While a personal vehicle is now considered a necessity, it doesn’t change the fact that these automobiles often come with a hefty price tag. Especially if you’ve only just started working or if you also have other financial obligations, the expense can add up as you go about with financing your next vehicle.
Here are some of the best tips you can follow in your pursuit of getting a new car while on a budget:
1. Set Your Budget
The very first step towards buying a car while on a budget is, obviously, setting your budget. You’ve got to determine the limits of how much you can afford to spend for your car so you can immediately narrow down your options. Don’t be tempted to spend more than what you initially intended. With so many car dealers today, you’re sure to find one that’ll be within budget.
Moreover, remember that when you’re buying a car, it’s not just the price on the tag that you’ll be facing as an expense. You’ll also have to consider the insurance, and even costs relating to transfer of ownership. In the long run, this should also include the amount you’ll spend for the maintenance of your vehicle.
2. Get A Loan Preapproval First
Many who purchase a car, even when on a budget, will most likely only pay the down payment at first. The remainder of the payments are to be completed through a loan or a mortgage. However, if this is the road you’re taking, be very sure you get approved for your loan right before setting foot in a dealer’s shop. It’s better that you apply for the loan with a lending institution that you’ve researched thoroughly and you’re sure will be giving you the best deals.
Otherwise, the danger might be that you could be pressured into immediately going for the lender of the car dealership you’re buying from. You may not be getting the best deals, especially as to the interest rate, when you didn’t give yourself the time to research and compare varying rates.
3. Follow The 20/10 Rule
Financial advisors swear by what’s known as the 20/10 Rule.
The 10 means that the amount you pay for the monthly amortizations of your car shouldn’t go beyond 10% of your monthly budget. While this may seem too low, it’s actually the best limit, especially when you’re on a budget. You wouldn’t want to go through a situation where you feel you’re deprived of your needs just because of your car’s monthly payments.
The 20, on the other hand, refers to 20% of your annual income. When determining how much you can afford to put in your car’s down payment, consider 20% of it. This is the perfect ceiling to give you a down payment that’s low enough so your savings don’t stumble, and high enough so your possible monthly amortizations may be lower.
4. Don’t Buy Any Add-Ons Right Away
Once you’ve settled with a price with the dealership you’re buying from, don’t purchase any add-ons in the dealership. While this may seem like a very obvious advice, it’s actually a common mistake committed by so many buyers.
After agreeing to the price, you’re sent off to the office to sign the final contract and other pertinent documents. While you’re at it, the dealer may try and talk more about the purchase of extended warranty protection plans, other insurance, and even gadgets and upgrades you can add to your car.
As tempting as it might be, stop right there. Refuse all offers. Otherwise, you may find yourself too convinced into those enticing offers.
With these tips, you can now be on the winning end of the finance strategy you’ll apply so you can have a practical car purchase. Also, now that you know where and how to start, it’s time to go shopping. Who knows? You might just be able to bring home the right car for you, just in time for the new year!