Buying a car is not cheap – for most, it can be considered their second largest purchase next to a house. With this, the decision should not be taken lightly. If you are not careful and financially ready, you could quickly lose more than what you bargained for.
To avoid spiraling down to financial ruin, here are some lessons that you should keep in mind:
Determine your needs
Cars come in different shapes and sizes. The choices are vast, which makes things overwhelming but you have to carefully examine your needs before you decide the type of car you want to buy. The best thing to do is to make a list of the most important criteria so you can use it to steer your search.
Do your own research
Before coming to a dealership, you should allot time on research. There are many sites out there that will give you detailed technical information about the car you are eyeing. There are also reviews that you can rely on but be wary of biased reviews.
Evaluate what you can afford
You have to learn how much of your income you can afford to spend on a car. Aside from monthly payments, remember that you also need to pay for repairs, regular maintenance, gas, and even insurance.
Before you start shopping, you should consider your budget. You have to determine how much disposable income you have. Disposable income is funds left after you pay all your monthly obligations like mortgage, debts, food, school, and utilities. By knowing this, you will have an idea of how much room you have for a car payment.
Learn how much to spend on a car based on your salary
Whether new or used cars in montclair, you should learn how much to spend based on your salary. Here are some rules that you can choose to follow:
- The 36% rule: your total loan payments should not exceed more than 36% of your annual salary. Total loan payments here include mortgage, student loans, credit card payments, personal loans, and car loan. For example, if you are earning $75,000 annually, the total loan payments should not exceed $2,250 monthly.
- The 20/4/10 rule: this rule indicates that you should put 20% down payment on a car, finance it for not more than 4 years and then keep the payment less than 10% of your salary.
Get the best deal
Now that you decided on a car and how you are going to pay for it, it is time to get the best deal. Here are some tips that you can consider:
- Shop on the last day of the month: if you buy last weekend of the last day of the month, you are likely to get a good deal because salespeople are hustling for their quotas.
- Choose more than a 1-year-old car: if you decide to buy a used car, make sure that you choose more than a 1-year-old car. This is to ensure that the car is worth 25% less because depreciation already hit.
- Avoid extras: while heated leather seats and satellite radio sound cool, you should not splurge on unnecessary things because it can increase the cost.