December 2nd, 2010
Best Practices for Buying a New Car
4 Comments |
**Today’s guest post is contributed by MoneyAisle.**
With cash in your pocket and a new car on your horizon, you may feel like a kid in a candy store as you stroll into a car dealership. But in reality, when you walk into a showroom without the proper preparation, you’re more like a bull in a china shop, wherein the china shop represents your precarious financial situation.
Take the following steps before buying a new car to ensure you get the best deal.
Decide how much car you can afford. Don’t trust the dealer on this one. They have a vested interest in selling you the most expensive car and car loan that you qualify for—they could care less if it meant eating Ramen for the rest of your life. As a rule of thumb, your monthly car payments shouldn’t exceed 20 percent of your monthly income. To figure out your monthly car payment, first deduct your down payment from the purchase price and then figure out what kind of auto loan you can get. That’s the next important step.
Get an auto loan. True, you can get a car loan from the dealer, but there are numerous reasons why this isn’t a good idea. In the end, you almost always end up paying more for auto loans from the dealer. Instead, get a car loan directly from the lender, either by comparing auto loan quotes online at sites like MoneyAisle.com, or by approaching your local credit union or bank. To get an accurate quote, you should know your credit score ahead of time. This step, combined with Step One, will let you know exactly how much you can afford to spend on a car.
Research at home. Nail down what type of car and which features you want before setting foot in the dealer’s domain. Also, take time to research what kinds of incentives, rebates and offers are on the table from manufacturers. Factor this in to the market value of the car you’re planning on buying, as advertised by other dealers and on third-party auto websites. This will give you a firm, realistic starting point from which to begin your negotiations.
Carefully review the terms and contract before closing the deal. Watch for add-ons and other sneaky line items in your contract that can jack up the price of your car. If you see something unfamiliar, ask the dealer to explain it and ask if it is absolutely necessary. If not, have it taken off.
Enjoy your car! Drive off the lot, confident that you did your due diligence and got a better deal than you would have had you walked into the dealership cold.
As an epilogue to your successful car buying story, you should remember to revisit your auto loan a few months or years down the road. Depending on the market, federal interest rates and your own financial picture, you may be able to get a lower interest rate and better terms by refinancing your car loan after your first few years of ownership.
MoneyAisle is an online resource where consumers find great rates on auto loans and refinancing. MoneyAisle runs live, reverse auctions (like a reverse e‐Bay) for consumers shopping for financial products. Consumers get exclusive rates and instant one stop shopping in a fun, dynamic auction format, and banks and Credit Unions get inexpensive access to new customers, accounts, and loans. Follow them on Twitter at @MoneyAisle.
Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.