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Even though there are ride-sharing services and public transport, driving is often still the most efficient way of commuting. If you are a professional that needs to visit multiple clients in one day, driving your own car helps you maximize the time in hand. There are also many more situations where a car is handy to have.
Whether you work full-time or run your own business from home, buying a new car can be considered an investment. However, you have to approach the purchase correctly, especially when it comes to getting the right financing for the purchase. We spoke to financial experts about buying a new car, and here are the top five tips we gathered from the discussions.
Before you can start searching for the right car to buy, you need to have a clear budget in mind. How much can you really afford to pay every month for the car? That amount will greatly dictate the car you can buy and your budget for the purchase.
Getting preapproved for a car loan is how you move forward. Instead of setting your own budget and ending up struggling to find a loan to match in the decision-making process, it is much simpler to get the loan preapproved by a lender of your choice.
A pre-approvedloan acts as a budget for the purchase. Depending on how much you can borrow, you can limit your search for cars that are well within your budget only. This too will save you a lot of time and hassle.
Check the Used Market
Used cars should not be dismissed as viable options. Getting a new car is the ideal choice, but that doesn’t mean you cannot dip your toes into the pool of high-quality used cars that are not that old at all.
Buying used reduces the loan principal amount by a substantial margin. When you can cut $1,000 from the amount you need to borrow, you are cutting a large chunk of the interest rate and other fees you have to pay further down the line.
The used market is also where you will find the best deals, including from the financial institutions specializing in this market. You can even use a car payment calculator to estimate how much you’ll have to pay every month for the car of your choice.
I cannot stress enough how important it is to negotiate. It is not only about reducing the price of the car; in fact, negotiating the price of the car you want to buy is the easy part. The hard part is negotiating a better deal with banks and other financial institutions you want to approach.
Fortunately, you can also use online tools such as the aforementioned car payment calculator to understand different loan offers better. There are ways to get quotes from multiple lenders without having to visit them manually.
With the quotes in hand, checking if you are getting the best deal from your favouritebank is easy. Compare quotes, not just based on the monthly payment amount, but also based on the total amount you will pay as you try to settle the loan.
Take Advantage of Special Offers
If the loans aren’t attractive enough, contact the lender and ask for a better quote. Asking for a discount helps too; you may get an extra discount added to the quote just because you ask. Remember that the market is incredibly competitive right now, so don’t be surprised to see banks offering additional discounts to win your business.
Discounts are usually obvious and easy to claim. Aside from the discounts offered by lenders, you can also look for seasonal promotions and better loan deals in general. Check review sites too.
Even when there is no direct discount available, there are other special offers to benefit from, including exclusive deals that you can only get from select dealers, freebies for the car, and even an all-risk insurance policy added to the loan agreement. Don’t hesitate to go after opportunities to save and reduce your loan amount.
Don’t Forget Insurance
Auto insurance is mandatory, even though the coverage amounts are different. Before agreeing to a loan and sealing the deal, make sure you also check additional cost factors, including the cost of getting auto insurance for the car.
Auto insurance is a part of the total cost of ownership for the car. That cost of ownership should be on your mind before deciding to buy a car. Aside from auto insurance, you need to consider the cost of repairing the car, getting it ready for everyday use, and more.
Take your time and understand each cost element carefully. You still have time to discover hidden fees and additional charges associated with using a loan to finance your purchase. These cost elements should also be considered when making other big purchases.
Manage Your Cash Flow
I know from personal experience that things can get out of hand when there are more loans to repay than there is income. The last thing you want to do is default on your car loan only because the loan repayment deadline is one or two weeks before your paycheck arrives.
Ideally, you want the total repayment amounts every month to be less than 30% of your primary income. Buying a car means using a portion of the allocated 30% for business or personal use. With a loan to income ratio kept at 30%, you can save more and be more prepared for financial emergencies.
A healthy cash flow also has a direct impact on your loan. A healthy cash flow means a good credit score – you will be viewed as more responsible – which means you will be offered lower interest rates from the start.
Buying a new car is a big move to make, so take all the time in the world and review your options carefully. The expert tips we covered in this article will help you get the best price for the car and secure you the most rewarding financing options in no time.