Slow down kitty!
Ok. By now, you’ve answered the ten questions from part 1.
If not, revisit them and come back so this part will make full sense and cents to you.
WHY: You know why you want to buy the car now. How do your other answers line up to this Why. You’re ready to answer if it is it truly a want, or a real need.
WHICH ONE?: If you know the car you wanted at the start, is it the same car? Or did you learn about another car within the same price range?
If you test drove it and didn’t buy, congratulations!!! If you’re the proud owner of a new car, keep reading anyway so you’ll know what to do better next time -or- simply to give yourself a pat on the back for a job well done. 😀
NEW OR USED?
Answering the question used or new is huge! A car depreciates either way, but a new car depreciates fastest when you drive it off the lot and within the first 2 years of ownership. A used car has already absorbed a bulk of the depreciation, so it’s price is closer to the value of the actual car.
In keeping it raw simple, Depreciation means how fast it’s getting to be worth nothing.
There are perks in buying new which involve less maintenance headaches. A used car could turn out to be worth a lot of headaches if the previous owner did not take care of the car, but to find out, ask yourself the worst possible scenario with maintenance. If the potential and actual costs of maintenance on a used car exceeds what you would pay to have a new car, it may pay off to buy new, but if you truly save with the older car and can get the time you want out of it, then going used is the most viable option. Things I’ve experienced with used cars have been, belts, filters, alternators, batteries, tires, etc. I’ve never purchased a lemon (knock on wood), but the things replaced were due to normal wear and tear. I purchased a car before for $2,700 and invested about $1,700 in maintenance. I drove over 60k miles in it over a 3 year period. It would have lasted an additional 2-3 years if I hadn’t loaned it to someone who totaled it. That’s another story! LOL
What’s your down?
Downpayment’s are always essential in lowering your interest rate, payment, and yeah, your interest rate! Zero down cars are never a good idea because you’re going in with negative equity.
Raw simple, negative equity you go in on the car loan owing more than the car is worth.
This translates to paying years on a car even when you no longer own it. Even if you purchase a new car after this car, that negative equity has to be paid whether it’s transferred into the new purchase or paid in your down payment. There’s so much more to this! But in time, we’ll discuss this topic more and more.
Where you headed?
Ok, so where are you going in your car? Is it only to get to work and the grocery store with an occasional trip to the movies? How many miles are you driving per week? The average person drives around 12,000 miles per year. That works out to be around 230 miles per week. Find out how much it would cost per day to commute using Uber or Lyft per day. Try it for a week before you buy a car so you have real numbers. For the purposes of this scenario, let’s say this person Uber pool’s at a cost of $18 per day at 7 days per week, that adds up to around $540/mo. If you were to purchase your new or used car, average person has to ask themselves, how much do I spend on my car note, insurance, registration, gas, maintenance, and parking per year and divide that number by 12. If the number exceeds $540, average person might just save a lot more by utilizing ride sharing as their preferred method for transportation.
Is this really for work?
- Now clearly, if you use your car at work daily for errands, etc. it’s part of how you make your money. But if you only use your car on occasion for a coffee run, or something that’s more like a monthly thing, it may pay to just do Uber X or XL on those days.
Credit is King!
Let’s face it, if your credit was over a 740, you most likely wouldn’t be reading this, you’d already know and be faithfully putting this in practice. But still, if’ you’re still running the numbers and the longing for independence is running through your veins. What’s your credit like? Is it above a 680? If not, may want to work on that first. Bad credit can cost you thousands in interest. Get your credit up to a number where your own personal bank will finance your purchase. AND it’s always better to go through your bank first and go to the dealership with with the pre-approval letter in hand. Rarely do dealers offer better financing and when they do, it’s almost always to those with excellent credit.
How much can you afford, are you willing to part with on a monthly basis?
- When you are calculating affordability, make sure you’ve factored in Savings, Rent, Utilities, FOOD, debt and entertainment. There’s nothing worse than having a car and having no where to go but work to pay for it. Whether you’re just so dag on stubborn that you’re at this point calculating doing uber to offset the extra $200 you need to afford your dream car or thinking you will be happy without saving as much – STOP! There’s 2 things you need to know. The first is, you can’t guarantee income you don’t have yet. The second, if you keep putting off your savings, you’ll never have it.