For many people, a car is a necessity. Many of us recognize the need for cars in our daily lives. And because they are such an important aspect of life, most people want to own a reliable, comfortable car that can assist in various activities.
5 Mistakes to Avoid When Buying a Car
When you are thinking about owning a car, the best thing you can do for yourself is to be financially and knowledgeably prepared for it.
1. Consider monthly payment carefully
Currently, there are many car purchase programs with attractive advertised installment plans. Even if you can afford to pay 100% cash for a car, financial matters are always a topic of discussion in any purchase negotiation.
During price negotiation, car dealerships may offer various options to suit your budget. They can do this by adjusting interest rates, providing longer loan terms, or reallocating finances to create a payment plan that fits your budget at the time of purchase. It may not seem like a big issue when you are in need of buying a car, but a loan with a fluctuation of a few percentage points per month due to interest rate differences can cost you thousands of dollars in total car expenses over a year.
2. Buy a new car
A car is not an investment, or at least not a good one.
You should know that a car can depreciate rapidly. In fact, a new car can lose 25% of its value in the first year.
Experienced car experts suggest that the best thing you can do is to let someone else take the initial hit (instead of you) by buying a used car that is one or two years old. Many years ago, there was a valid reason to buy new and that is warranty. But nowadays, most vehicles have longer warranties and can still have an effective warranty even when you buy a car that is a few years old. You can even opt for an extended warranty package, which often costs much less than the amount by which a car loses its value in the first one or two years.
3. Choose the wrong car model
Are you a single person who only needs a vehicle for daily commute? If that’s the case, I want you to know that you might not need an SUV with up to 9 seats because it may force you to spend more money to own a car.
Instead, you should buy a car that suits your needs.
4. Fail to consider other costs
The actual costs of a car are important, but what often gets overlooked are all the costs of car insurance and long-term maintenance that come along with owning a car. Remember that car insurance premiums usually increase with the value of the car, so buying a more expensive car will lead to higher annual insurance costs. This amount can go up to hundreds, if not thousands, of dollars more per year. In addition to insurance, you have to factor in all the maintenance costs. Cars need oil changes, new brakes, air filters, tires, etc. Luxury or performance models often require premium replacement parts that can be much more expensive than standard counterparts.
Lastly, you need to consider fuel consumption. This is also something that can cost you a lot.
5. Deals or discounts
Remember that cars can depreciate quickly, so if you’re financing a car, you often find yourself in a “negative equity” situation. Simply put, it means that your debt is more than the car’s value.
Keep in mind that there are other fees and taxes when purchasing a new car, and they are often rolled into the loan if you don’t put a down payment. That means right after you drive it off, you’ll owe the bank or the car dealership more money than the actual value of the car.
This is not an ideal situation if you plan to sell or trade-in the car before the loan is paid off. If three years down the line, you need a new car and you owe $10,000 while the car is only worth $8,000, then you’ll have to pay the remaining $2,000 out of pocket or roll it into your new loan. You may feel comfortable walking out of the dealership with a brand new car without putting a penny down, but you’ll pay a high price.
Source: toquoc.vn
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