Buying Your Next Car

Doesn’t everybody love that new car smell? Even if you aren’t a “car person,” it’s easy to fall into some traps with new vehicles. Here are some ideas to consider when it’s time to buy your next car:

1. Remember that new cars depreciate as soon as they roll off the dealer lot. When you buy a new automobile, it’s nearly a guarantee you’ll lose money. Examine your situation closely…do you need a new car, or is a pre-owned ride a better fit? For most, purchasing a pre-owned car is a financially smart option. Request a car history report before buying and take it for inspection to a trusted mechanic. You don’t want to purchase someone else’s lemon. 

2. Loan rates are low at the moment, but don’t get sucked into a discussion about “incredible” monthly payments, if you have the ability to pay for the car with cash. If you do have to take out a loan, check your credit report first. You can secure a free credit report each year from annualcreditreport.com, which is the only free credit report endorsed by the U.S. Federal Trade Commission. Once you know your report is clean, don’t take out the loan offered through the dealer without first researching all of your options. While sometimes dealers have negotiated rates you won’t be able to beat elsewhere, check local banks, credit unions and online sites for competing rates. Opt for the shortest loan period possible. You don’t want to be stuck paying for a car you’re no longer driving. (This is also a great time to start a fund on the side to pay cash for your next automobile.)

3. Leasing is rarely the best financial choice, but if you’re going to lease, begin by negotiating the price of the car. Lease payments are based on the difference between the sales price and a fixed number called the residual value (the amount the lending institution thinks the car will be worth at the end of the lease). If you forget to negotiate the price of the car, you’ll raise your monthly lease payment.

Buying a car doesn’t have to be a horrific experience. By arming yourself with a little knowledge, you can come out ahead and with the ride of your (or at least the ride of your pocketbook’s) dreams!