Buying a car is a significant expense. Before making such a big financial investment, it’s important to understand your current economic situation and car-buying options. Here are six important considerations to make when setting a car shopping budget.
1. How Much Cash Do You Have?
You need to know how much money you have available to put down for a potential deposit or down payment. This will help you budget, and negotiate at the dealership. You do not need to pay for the entire car in cash. Sometimes it’s more advantageous to explore financing options, or to take out a small loan you can quickly pay back to get a better dealer price.
2. How Much Can You Pay Per Month?
If you’re financing, you need to know how much you can afford to pay for your new car per month. This includes payments to your principal and interest. Dealers can create deals based on your limitations, and adjust payment rates, terms, or lengths accordingly.
3. What’s Your Trade-In Value?
If you’re trading in your car, make sure you know what it’s worth. This will help you budget, and make you more confident during negotiations. Check a vehicle appraisal or resale site to calculate what your car’s value is, and it’s smart to collect figures from several different sites so you have a good idea of what a fair value is. Consider cleaning or making minor repairs to your car so that it looks its best when you’re presenting it to the dealer.
4. What Are the Vehicle Maintenance and Operation Costs?
Owning a car is not just about making the payments. You need to pay for gas, insurance, maintenance, repairs, parking, plate registration, city stickers, and a host of other operational expenses. Make sure you have an understanding of all these additional costs before finalizing your budget or a deal.
5. Is There a Cheaper Option?
Just because you can afford to pay for a car doesn’t mean it’s a wise purchase. If you buy a more modest model with fewer options you can allocate that money towards other expenses or investments. Additionally, consider buying a used automobile to save considerable money. Cars depreciate as much as 20% just in the first year. This is a huge saving and also offers you a wider selection of cars to consider purchasing.
6. What Will Be the Resale Value?
Cars slowly decline in value after purchase, with the greatest loss usually occurring right after sale and within the first year. It’s important to have an idea of how long you plan to keep a car, and what it might be worth when you’re ready to sell.
When setting a car shopping budget, many factors should be considered, and it’s important to consider all of the above factors so you are prepared in car shopping knowledge before you begin the car buying process. Being prepared with an accurate budget is one of the most important things you can do when looking to buy a vehicle, whether new or used.