Monday, April 21, 2014

Things to Know Before Buying That Car

May 15, 2013 by  
Filed under Frugal Mom

Piggy Bank

Photo by joannelummy

Are you currently in the market for a new car? If your car is currently falling apart and is costing you more than $200 a month in repairs, then I would say yes, you are a great candidate for buying a new car. But, it’s not enough to just know that you need something else to drive, you need to learn quite a few details before making that official decision of what you’re driving next.

Selling Your Old Car

First of all, I beg you not to take your car with you to the dealership to trade it in. If your car is worth $4,000 according to the private party value on Kelley Blue Book, they’ll most likely only give you half that. If you don’t want to hassle that much with selling your car, just list it on Craigslist for $3,000. You’ll probably sell it in a day and you’ll make $1,000 more than if you would have let the dealer take it off your hands. I’d say that’s well worth a day’s work!

Buying With Cash or Credit?

In today’s society, it’s almost expected that you’ll be paying for your car with a bank loan. Hardly anyone pays with cash. But, what’s the best way? Well, that depends. First of all, I’m assuming that you’re being responsible and buying a car that is well within your means. If you earn $40,000 a year, there’s absolutely no reason for you to own a $20,000 car. It’s best to look for a dependable car that’s less than one quarter of your yearly salary, or in this case, $10,000.

Next, how much money do you have in the bank? If you have a fund that you’ve been throwing money into for a while in anticipation of needing a new car, then you’ll most likely be able to pay for your car with cash. But, if you have very little cash, or if you’ll be left with nothing after a cash purchase, then you’ll most likely have to buy your car with a bank loan.

If you’re taking out a loan, it would be wise to use a calculator like the Clydesdale Bank loan calculator. This will show you what your monthly payments will be. Sure, you could get a sweet car with slightly higher payments each month, but you don’t want to be strapped for cash at times either. It’s best to keep those payments as low as possible!

Is It a Lemon?

If you’re buying a brand new car, you’ll have no idea whether your new ride is a lemon or not because there is no history on it. If, however, you buy a used car that is 3 or 4 years old, you’ll be able to find consumer reviews from many different owners. You’ll know exactly what to look out for when you make your purchase and it will most likely keep you from buying a lemon! In addition to reviews, you’ll also want to take it to a mechanic, just to be certain it is road worthy and won’t cost you an arm and a leg shortly after the purchase.

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