When buying a car, the choices are endless and finding the right combination of features at the correct price is a big challenge.
When you are considering buying a car avoid the following mistakes;
Thinking in terms of monthly payment
Not many people buy cars in cash and the salespeople know this. That is why negotiations are always about what you can afford to pay in a month. Surprisingly, the car dealers will always find a plan that fits your budget. They can do this by adjusting the interest or the interest rate. They can also do it by extending your loan term.
You may think that the deal is good, but small extra percentage points or additional year on a loan may translate into thousands of dollars being added to the total cost of the vehicle.
Would you consider buying a new or a used car?
Most people opt for new cars. What they don’t know is that new cars depreciate faster in the first two years – between 25 and 40 percent per year. So the best thing to do is to let someone else bear this depreciation then buy it when the depreciation rate is low.
People used to buy new cars because of the warranty, but nowadays most vehicles have longer warranties that are effective even if you buy a used car. You can also opt to purchase an extended warranty which is far cheaper than the value the car lost in the first two years.
Another advantage of buying used cars is that they are cheaper compared to new ones. In fact some are sold at throw away prices by their owners.
Choosing the wrong vehicle
Vehicles come in different sizes and with varying features. So before you buy a vehicle you need to ask yourself a number of questions. For example, do you need it for personal use or you need it for business? If you need a car that you will use to get to and from work, you don’t need to buy a $45000 SUV that has eight seats and has a capacity to tow 5000 pounds.
Ignoring other costs
The cost of a vehicle may be quite affordable, but there are certain costs that are hidden and people usually overlook like long term maintenance costs and insurance.
Remember the insurance cost increases with the cost of a vehicle; a more expensive car will therefore attract higher premiums.
Maintenance costs include oil changes, air filters, brakes and many more. You need to find out whether you can afford these for the particular vehicle you want to purchase.
There is also the issue of gas consumption. Vehicles consume gas at different rates depending on their model.
So you need to factor in maintenance cost, insurance and the cost of gas before you pick a particular vehicle.
Putting no deposit
There are a lot of incentives that come with buying a car, and you can find yourself behind the wheel with no money down. Sounds great but remember vehicles depreciate very fast and if you finance the whole purchase price you will find yourself left with the burden to repaying the loan and at the same time maintaining the vehicle; this can be quite overwhelming.
You need to know that there are taxes and other fees that go into a new car purchase and they are rolled into the loan if you don’t put anything down. This means immediately you drive off the car, you will owe more money to the dealership or bank than the vehicle is actually worth!