Purchasing a car is not any straightforward choice. From paying the money in one shot, to purchasing a car using a type of finance, there are numerous alternatives everyone considers. You also additionally need to consider the expenses involved. Truth be told, it’s presumably the second most costly thing you’ll purchase after a home. So it’s vital to ensure you get the best arrangement on car financing.
So in case you’re purchasing now, here are a few tips to get you the best car finance deal:
1. Always consider Down Payment
There are a great deal of incentives with regards to buying a car, and you can place yourself in your shiny dream car with no cash down or down payment. Sounds incredible, right? But wait. Keep in mind, vehicles deteriorate quickly. So if you wish to finance the entire price of the car, you’ll get yourself upside down on the advance instantly.
It simply implies that you owe more than the car is worth. There are assessments done and different expenses such as taxes and licenses shall be included in the price of the car, which will now be a part of your loan amount. So, you owe more cash to the bank or dealership than the vehicle is really worth.
This is a terrible thought if you plan on offering or exchanging the car before the credit or loan is paid off. So it might look great to stroll of off the dealership with a fresh, out of the plastic, new car without having to pay a dime in advance, however, it will cost you a lot more in the future.
2. Buying a used car or a new car
A car is not any random investment, at least not an inexpensive one. Cars deteriorate in worth rapidly, so when you purchase another car, you can anticipate that it will diminish in quality from the minute you become the owner. Indeed, a new car normally diminishes in worth by 25%-40% in the initial two years.
Today, most vehicles have longer guarantees and warranties, that can, in any case, still be in effect even if you buy a car that is few years old. Also, you can frequently choose to buy an extended warranty, which is ordinarily far less expensive than the value of the car lost in the initial years.
So, be wise, and buy a used or new car, as per your requirement or need. Click
here to know more.
3. Understanding different payment and financing options
As a car buyer, you have a lot of options to explore in terms of planning your finances and choosing the correct financial or payment as per your capacity and need.
You must first consider all your monthly or annual expenses that you already have before deciding any plan. This will give you an idea as to how much expenses you already have before adding any additional car expense and hence, determine your capacity to pay the amount.
If you have enough savings already, you can opt to pay the entire amount outright (you could use your biggest investment, deposit or savings) and then, you don’t need to indulge in the hassle of getting a car loan and the process of it.
If you don’t have that much savings, you can opt for a suitable financial plan as per your capacity, credit rating, calculating and comparing the different APR’s (Annual Percentage Rate – which includes all the charges you will have to pay including interest. It is expressed as a yearly rate. You might have the capacity to negotiate this figure. Elements that impact your APR: Your record of loan repayment, current finance rates, dealers compensation, rivalry, economic situations, and uncommon or special offers are among the variables that influence your APR. Attempt to arrange the lowest APR generally as you arrange the cost of the vehicle) from different kinds of financial plans, and various other verticals.
There are plenty of options available such as personal loan, hire purchase, personal contract plans, leasing options, etc. Each type or category has its own features, merits and demerits. For eg:- Personal loans are generally the least expensive approach to fund a car deal, however, it is subject to a good credit rating. Unlike personal loan, in hire purchase, you have flexible repayment terms, say 12-60 months. However, the car is not yours to own till the final installment is paid. Hence, choose the plan that is the best for you.
If you want to know about how to save on car loans, here are some hacks.
4. Expect the unexpected
Now if you’re purchasing your car through a loan or financial plan, there are plenty unexpected circumstances that could make it troublesome for you to keep up the installments. Unfortunate events keep taking place, for example, work misfortune, separation, accident, death of breadwinner, ailment, repairs to your home or any kind of household breakdown.
Shield yourself against these unfortunate events by ensuring you have:
(a) An insurance policy which would ideally cover your life, health, home, accidents, medical illness and unemployment as well.
(b)An emergency fund which would act like a reserve during contingencies to cover no less than three months of costs or expenses. In the event that you pay for your car in an outright manner, you won’t have the stress of meeting month to month car installments. But, you might be left with next to zero reserve funds and might face cash crunch. Therefore, since you’re in possession of the car as the owner, you can trade or sell it to raise cash, if need be.
Hence, it is important to build an emergency fund to meet expenses at crucial times.
5. The Bottom Line
As a car buyer, irrespective you’re a newbie or a veteran, extensive research is compulsory and always required to know the current trend and understand the financial system at present. So do your homework and get information about everything you need to know in depth. This can be anything regarding different car finance plans, or evaluation of rebates and interest rates offered by different dealers or manufacturers, or even finding the trade-in value of your current car, or the real or true cost of owning a new car, etc. This will keep you prepared, alert and informed – Always!
We hope your car finance needs and any confusion regarding it, has been taken care of! This way, you’ll be in a much better position to financially plan about buying the car of your dreams!
Also check our blog on how to get a car loan.
You’re always free to give us feedback in the comments section.