Making Sense of your Dollars- How To Budget For A New Car
Car buying can be such a daunting task, especially when you are trying to stretch your dollar and get yourself the maximum amount of vehicle for the very best price. How do you navigate your way around the hype of the car salesmen and then the added emotional pull of what you envision to be the ultimate ride verses the voice of reason and practicality when it comes to your wallet? Here are a few tips to consider when purchasing your new car.
The Old Fashioned Way is the Best Way to Purchase Your New Car
First, the most conservative way to avoid digging yourself deep into a car loan payment is to save, save save. That’s right, the way your grandma and grandpa used to do it. In fact, if you are totally committed to purchasing the car of your dreams, you know you’d enjoy your new ride more if you paid for it IN FULL, with your own hard earned cash. Sure, saving for that kind of purchase would take months, if not years but financial conservatives swear by this method and there is some real validity to it. Consider putting a chunk aside with every paycheck- a set amount that gets sent directly to a remote (and I mean REMOTE) savings accounted delegated specifically for your car- kinda like paying yourself a car payment only this time you get to see the balance accrue instead of disappear into thin air. Imagine arriving on the car lot, having saved for some time and laying down stacks of greenbacks and in turn getting the keys to your brand new ride. Just like that.
A Downpayment is Key
If you don’t have the discipline or the means to set aside a chunk of money every month to save for your new ride, perhaps saving a decent amount for a down payment is a more viable option. Although many car dealers advertise a “no money down” option, this can come with some disadvantageous consequences. For example- by putting no money down, especially on a brand new car means that as soon as you drive the car off the lot you are “upside down” on your car loan. This is an all too common trap that many first time new car buyers get into as they are overzealous and under-cautious when it comes to the emotional pull that entraps a inexperienced buyer. Avoid this trap by having a sizable downpayment (25-50%) is recommended. This will help you having more leverage when negotiating with the sales team and qualify for a lower interest rate and ultimately a lower monthly payment.
Protect Your Investment
Don’t forget to consider the price of insuring a brand new car as well. (Especially if you have been driving a jalopy with the bare minimum coverage) Brand new cars, depending on the type, color and engine type are considerably more to insure. Be sure to include this in your budget, especially if you are looking at adding in the dreaded car payment to your mounting list of monthly financial obligations.
Don’t forget. Car manufacturers are in it to win it. They employ a winsome team of sales professionals who can hustle unknowing buyers into getting into payments over their heads. Unfortunately, this is a tactic employed by many a salesmen. As a shrewd, savvy consumer, arrive on the lot with confidence, fully able to strike a balance between what your pocketbook deems practical and what your taste requires.
Editor’s Note: Lindsey Grant writes for finance blogs. If you want to make sure your finances are in a good place, use resources like http://www.financialcalculator.org/investing/interest-calculator”.