One of the first big financial steps you’ll likely take is making the decision to buy a car. Buying a car can be exciting, a little stressful and will have a big impact on your financial life. You’ll need to consider what you want, but also what you can reasonably afford. Owning a car doesn’t just involve making a monthly payment on your loan; you will also need to consider things like gas, insurance and maintenance before making a purchase. And always remember that a car isn’t an investment—it’s just a means of getting from one place to another.
Buying a car is essentially a three-step process: choosing the car you want, negotiating the purchase and actually paying for it.
Step One: The New or Used Decision
The automobile industry spends millions of dollars each year to bring you advertisements for sleek, shiny, new cars with countless features and custom furnishings. But as you can imagine, luxury comes with a high price tag, so as you begin your search be sure to set a limit on how much you’re willing to spend.
There are pros and cons to both new and used cars; new cars usually come with a warranty that will cover unforeseen expenses, but can be expensive. Buying used can be a cost-savings up front, but you’ll need to do extra homework on the car’s history to avoid getting stuck with a clunker. Sites like Carfax.com offer history reports that can tell you if a car was ever stolen, salvaged or recalled, so make that part of your research process. It’s also a good idea to have a qualified mechanic take a look at the car before you buy.
Step Two: Negotiating
Negotiating the purchase of your car can be the most stressful part of the process, particularly if it’s your first time. It helps to go in knowing the facts about the car you’re interested in and be firm on your price limit.
The Internet is a great resource for comparing prices. Check out sites like Autobytel and CarsDirect to get quotes beforehand. Don’t be afraid to share competitive pricing with your salesperson. While you negotiate, stay focused on the purchase price of the car you want and keep discussions about trade-ins or financing options separate. Be wary of expensive add-ons, too; often times, dealerships offer things like rust-proofing or extended warranties that are profitable for the dealer but can be very expensive for you.
Finally, if you feel that you cannot get the price you want or you aren’t being treated with respect, don’t be afraid to table the negotiation and take your business elsewhere. There are many dealerships out there who would love to have your business!
Step Three: Paying for the Car
When it comes to paying for your car, you have several different options.
The first and easiest option would be to pay cash in full, that way you’ll avoid any interest expenses. If you’re buying a new or more expensive used car, though, paying cash might not be possible. In that case, most people choose to make a down payment and then finance the rest of their purchase with a loan. You can take a loan through your bank or credit union, or through the dealership itself. If you’re not planning to finance through the dealer, secure your loan before you walk into the showroom.
Another option is to lease a car, which avoids the need for a large down payment. When you lease, you make monthly payments until the lease is up, at which point you return the car. The obvious drawback here is that you don’t actually own the car.
Whether you’re leasing or buying, be sure to fully understand the terms and conditions before you sign any documents.
Are you ready to take your first steps toward owning a car? Community Bank offers auto loans to help you finance your purchase. Stop in and talk to us anytime!