Buying a new car? It’s definitely an exciting prospect. Unfortunately, new car buyers are highly vulnerable to making mistakes that cost them a lot later. Here is a list of common mistakes new car buyers are prone to making that you should absolutely avoid:
Not Setting a Budget
Don’t shop for cars without having an idea of what you are able to, and are willing to, spend. You must set a budget for your first car considering your income and other expenses. Also see how much the insurance will cost, which can be done using an online service to find cheap car insurance. Keep in mind that the value of the vehicle deteriorates each year with use. There’s no sense in spending a lot on a car now and expect returns later. Buy a car that will suit your needs for five years or so. Stop fantasizing about buying your dream car. Be realistic and set a budget.
Not Calculating Car Insurance Fees or Monthly Gas Costs
Most new car buyers fail to realize that the full cost of owning a car surpasses the price of the vehicle. Car owners need to pay for insurance, repairs and monthly gas. When you set a budget for your car, all these costs must be considered. First, find a car model that you’d like to buy. Then calculate the cost of gas for that car to travel the distance between your home and office for a month. That’s the least amount of gas money you will have to pay per month. Can you handle more? Think about all these expenses before buying a new car.
Failing to Get Financing before Shopping
You need to get financing before you show up at a car dealer to shop. Car dealers often charge a premium for dealer financing. Dealers base their calculations on the wholesale value of the car in addition to interest. This amount is always more than getting your own financing.
Singing Up for Prolonged Payment Plans
Ideally, you should pay for the car wholly upfront. When you sign up for monthly plans, you end up paying an interest rate, which always adds extra cost to your car. The longer the payment plan goes on, the higher the overall interest fees will be. So, if you do need to sign up for a monthly payment plan, make sure it’s short. You may think that paying $2,000 for 6 months is a bad plan compared to paying $200 per month on a 5-year plan. The longer plan will cost you a lot more than the shorter one because of interest rate. Stay sharp when you do the math.
Compare Prices Online
It’s not wise to buy a car in person at a dealership without checking out models online. Car dealers are very adept at pushing ill-suited vehicles onto unsuspecting newbies. Do some research online on finding a car with a price tag that suits your lifestyle and budget. You will be able to compare prices and get a realistic value for the car. Afterward, visit a dealership and see what they have to offer. Be informed first and foremost to avoid overpaying.
Before buying your first car, adjust your expectations to your budget. Make peace with the fact that you may not be able to afford your dream car just yet. When that happens you will be able to make a smart decision that will not ruin your finances.
