Managing Credit

What to do Before You Buy a Car

Get from A to B When Looking for a New Vehicle

Buying a car can be an exciting and stressful experience. Not only will you commit a large part of your budget to financing and maintaining the car, if you're a typical driver, you'll be spending a lot of your time using the vehicle. So it's worth it to take the time to research and plan your purchase. It's easier than you might think. Just follow these tips and you'll have all the knowledge you need before you hit the dealerships.

The Basics

First, decide if you'll buy new or used. Each choice has its own benefits and you should base your decision on your needs and your budget. If you want or need to buy a used car, then decide how old you're willing to go. The older the car, the cheaper it will be to buy, but the more likely it is to have wear and tear that will cost you in the long run.

Generally, a new car will cost more than a used one and will require full insurance if you finance it. The yearly registration and property tax will be more expensive for a new car too.

Check Your Credit Score

Unless you've saved the thousands of dollars it will take to buy what you want with cash, you will have to finance your purchase. Since you'll have to apply for a loan, you might want to get a copy of your credit report and review it for any errors that could curtail your plans. There are three credit bureaus that provide your credit report: Experian, TransUnion and Equifax. To be thorough, it's a good idea to get your report from all three bureaus. You can buy a copy of your credit report that includes your credit score--a number ranging up to 850. The higher your score, the better credit you have and the more likely you are to get a good deal on financing.

How Much Can You Borrow

Once you've made sure that you're creditworthy, then you can start shopping for the best deal on a loan. Check with banks, credit unions and online loan companies. Apply for that loan while you're shopping for your car. You'll be approved to borrow a certain amount and that amount, along with any down payment you can make, will determine what you can spend. Remember that the final purchase price will include tax and license fees plus any extended warranty you might want to buy.

Be sure to take into account the overall cost of the loan. The longer the length of the loan, the more interest you'll pay. Beware of low monthly payments that translate into loan payoffs for more than 48 months. You may end up paying much more for the car than it's worth. Worse yet, you could be on the hook for a loan long after the car has outlived its usefulness.

Choose What Car You Want

Some makes and models are more expensive to buy, insure and maintain. Making your choice will be easier if you can narrow your list of preferred cars to two or three and then see how they rank in price, maintenance and insurance costs. You can search online for car prices, vehicle history and maintenance costs.

If you're buying a used car, be sure to check on the historical performance for your preference. For instance, the particular model you like might have an overall stellar record with the exception of one bad year. So you'll want to avoid any models made in that year.

Explore the Options

Next, decide what options you need to have in your car. This is especially important when choosing a new car. Options such as tinted windows and a sunroof can add hundreds to your purchase price. If you're limited by how much you can spend then you may have to forego some options.

Research Prices

Now that you know exactly what you want--the year, make, model, including all the options--see how much it will cost. Comparison shop on the Internet to find out how much you can expect to pay for your car.

Shopping For Warranties---It's All in the Fine Print

Unless it's a private party sale, your purchase will include a warranty. You'll probably be asked if you want to buy an extended warranty. You'll be better prepared to make your choice if you've already shopped around for good deals in extended warranties.

Car salesmen can be intimidating and many a car buyer have walked away from their purchase wondering if they really got the best possible deal. If you follow these tips, you'll not only feel more confident when you negotiate your next car purchase, you'll stand a much better chance at getting the best deals.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


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