Whatever the reason — whether your old car can’t make it to work anymore, or you’re expecting a nice-sized tax return, or you’re getting your first car — you may be thinking about buying an automobile, either new or used. When it comes to making a large purchase like this, you might be wondering where you should start.
Like with any expense, there’s a process you can go through to ensure that you not only get the best possible deal on whatever sort of car you’re getting (new, used, certified pre-owned) but also that you are in a healthy financial position to take on this new debt. In addition to finding the best deals for the vehicle you want, you will also need to research your own credit situation to make sure you’re ready for the payments, maintenance, and related expenses. With that in mind, we have the top ten things you should keep in mind when buying a car.
- Create A Budget. If you don’t know what you’ll be able to put toward payments, you won’t know your options when it comes time to actually car shopping. Do you have any money to put toward a down payment? What can you afford for a monthly payment? If you are looking to get a used car, would you be able to afford a lump sum purchase? You should first know where your finances stand before you take the next step.
- Order Your Credit Report. In addition to knowing what you can afford and being able to budget for the cost of a new car, you also need to know the overall health of your finances. The best way to learn the shape your credit is in is to order a credit report. By law (under the Fair Credit Reporting Act or FCRA) you are entitled to one free credit report every twelve months from each of the three major credit bureaus (TransUnion®, Experian®, and Equifax®). You can get your free credit report by going to www.AnnualCreditReport.com. Once you have your report, be sure to review it for discrepancies and to report any errors to the credit bureau you got the report from and also to the lender. You can also see if there’s been any unauthorized activity in your name — this can indicate possible identity theft, which will need to be reported to the authorities as well as the credit bureaus and your bank, among others.
- Research All Costs. Costs include the monthly payments, interest, the difference between car makes and model years (if you’re looking for a new car, you can save money by leasing or purchasing one model year older), as well as factoring in expenses like gas, tolls, routine maintenance, and car insurance. Make sure that these costs don’t exceed your budget
- Learn Your Financing Options. How will you pay for your car? Will you pay cash for a used car? If you’re looking to lease a new car, how will you be able to finance it? What if you had poor or bad credit? There are a number of options available to you for auto financing regardless of your credit situation. AmOne has more information on auto loans available on our site so you can determine which type of financing is right for you.
- Find Out About Pre-Approval. If you’ve decided that a loan will be the best way for you to finance your purchase or lease, contact your bank, credit union, or other financial institution to see if you might be able to qualify for pre-approval. Using this information, you can reevaluate your budget to ensure that the interest rate doesn’t effect your ability to afford the car.
With this information in hand, you will be in a better position to negotiate for the car you want with the payments you’re able to afford. Knowing where your finances stand will help make the selection process — from visiting area dealerships, speaking with salespeople to learn about the car’s features, test driving to make sure you’re comfortable with the make and model, and ultimately purchasing the car — much easier and less stressful.