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Important Things To Know Before Buying a Car

Which Car to Buy

I need a car – can I afford it?

Two big questions you need to seriously ask yourself before purchasing a car

  • Do I really need a car?
  • Can I honestly afford it?

If you believe that you do need a car, as public transport, carpooling or alternatives are not an option, then you need to understand whether or not it’s affordable.

Any car owner understands that the real cost of a car is not the price which you get from the car salesman. Today there are vast amount of car choices out there which makes it incredibly difficult to choose one. And, on top of that, there are many packages and additional items to consider which starts to make your brain hurt. It then makes sense to simply speak to a salesman and take what they say as gold, right? Wrong, you can do all the research yourself to see what best suits you, and the great thing is – it isn’t very difficult!

There are a few important factors to consider when trying to understand what car you can afford. Let’s take a look at them.

Insurance

Insurance is required when owning a car and a big portion of your monthly car payment will be going toward insurance. This is very important to take note of when considering whether or not you can afford a specific car. There are a number of factors which affect cost of the insurance. A lot of the factors to consider for yourself are; where you live, your credit score, your profession etc. There is little to nothing you could do to change these factors but it is important to note that the total cost of the car is affected. (If you find that your credit score is in a bad state consider speaking to a debt counsellor).

Some factors do affect our decision making. Let’s take a look at a couple big ones.

The car itself.

As a rule of thumb to follow is the higher the price of the car the higher the insurance premium would be. However, some lower priced cars could have a relatively higher insurance premium due to it being considered ‘high risk’ in the likelihood of theft. Some insurance would require certain security additions installations, like Tracker. Remember to ask the car salesman about the insurance premiums and options and take all these costs into consideration.

Who is driving? Nowadays, most people know how to drive, so we often don’t mind allowing a close friend or relative to drive our car. Before purchasing insurance make sure you are covering the drivers for whom the car is intended and consider the insurance policies covering third party drivers.  

Maintenance or service plan?

Before we dive into which plan is most cost efficient, or whether or not a plan is a good idea in the first place, let’s understand what a maintenance or service plan is.

Although cars are known to be an expensive asset to purchase the truth is the expenses keep on coming. Cars are made up of many parts which wear & tear through the years – brake pads need replacing, windscreen wipers become worn down, fan belts become too stretched, tyres lose their grip and the list goes on. All these minor fixes which would usually have you reaching for your wallet time and time again could all be included in a maintenance plan. Purchasing a car with a maintenance plan raises the price of the car initially but limits your future payments toward tedious fixes on worn parts.

You might note that a service plan is often cheaper, this is because a service plan usually includes an oil change and overall check-up of the car. A service plan is great as it keeps your eye on any potential issues with your car however, you will need to be ready to cough up the cash to fix the issue before it gets any worse.  

When considering whether to get a plan or what type, one should also consider the amount of time and distance the car will be driven and the condition of the roads. Longer distances and poorer conditions means there is a high chance of greater wear & tear and therefore more need for a plan.

All in all, due to the deteriorating nature of cars, a car with a reasonably priced maintenance plan is a good idea to have in the long run.

New vs Old

No doubt a second hand car should be cheaper than a new equivalent. More often than not – second hand cars are in very good shape and it should definitely be considered seriously due to the discounted price and ease of affordability. If you are afraid of purchasing a damaged car you can simply do your homework on the seller and double check the car’s VIN number. There are plenty of regulations governing the selling of second hand vehicles, so simply do your homework and you can end up with a reliable, affordable and healthy car.

 

Financing

Probably the biggest concern on everyone’s mind before entering the car dealership – how to finance it. It is a good thing that this is on your mind as it is something which needs to be thought about and researched. The best thing you can do is start deciding on the type of financing, and from whom, before entering the dealership. Although the salesman has plenty of experience in helping various new car owners find financing, the truth is this person is a salesman trying to make a sale. It is not just important that you get financing, it is important that you find the financing which best suits you.

Phone your bank, speak to local banks and credit unions. Review your options in terms of a loan and in terms of a lease. Note down all the rates, prices and repayment durations. Once you have done this you can now walk into a dealership with a clearer understanding of what which cars you may be able to afford and you will be less swayed by the salesman’s charm.

If, when you are doing your financing research, you find you are already concerned about the debt you’re in and it is causing your credit score to be low – speak to a debt counsellor. A debt counsellor could offer you free advice and also assist in restructuring your current debt to a more favourable structure which best suits you.

These factors should all be seriously considered before purchasing a new car. Now that you have done your research and you have taken into account all the additional costs. You have considered any potential future costs and looked at your current and future earnings (including all your current debt), you can ask yourself – can I honestly afford it?

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