Your car is breaking down. It’s making a weird noise, and you’ve taken it to the auto repair shop so many times that you know it costs more to get it fixed than its worth. In the past few months, you’ve been avoiding taking your car for long drives because you’re afraid it will gasp its last smoky gasp and leave you stranded on the side of the road, waiting for someone to tow it away.
It’s time to face it. You need a new car. And cars aren’t cheap. You know. That’s why you’ve been avoiding it. But you do have some saving, and you know it’s time. So where do you start? Shopping for cars is tricky. It’s an important financial decision with long-term implications. You need to consider all the factors involved, so you feel safe knowing that you picked a reliable vehicle that matches your lifestyle and has the features and amenities you need. To get to that point, you can start by asking yourself the following questions:
What Is Your Lifestyle? What Kind of Car Do You Need?
When you’re shopping for a car, what matters most is that you get the kind of car you need – a car that matches your lifestyle. So start by asking yourself what you need from a car. Are you single and you mostly want to use it to commute to work? Do you have a family dog included? Or are you looking to expand your family in the next few years?
If you’re single, your lifestyle allows for a sporty little car that fills you with a sense of adventure. On the other hand, if you have a family, you need room for nappy bags, car seats and strollers. Then an SUV would make more sense. If your kids are a bit older and you need to pick them up from school and take them to soccer practice, then you might even consider getting a minivan.
You’ll also want to think about what kind of terrain you’ll be driving on. If you live in a rural area and do a lot of off-road driving, then you’ll need a 4X4. For long-distance highway driving, it would be better to get a car with good fuel economy and smooth handling.
What’s Your Budget? How Much Can You Afford to Spend?
The second most important thing you want to consider is your budget. It’s better to figure out how much you can spend before you visit any dealerships and get carried away. Do you have savings and can afford to pay full-price or do you need financing? If so, how much can you afford as a down payment?
You can certainly take into account the financing offer made by the dealer. Dealerships know that it’s a buyer’s market and they try to stay competitive and make the purchasing process as smooth as possible. At the same time, dealerships are businesses with overhead that need to make a profit. You don’t want to be an impulsive buyer that gets lost in the deal and ends up getting the wrong car for the wrong price.
Before you even head to the dealership, we suggest you look up car loans on your own. You can compare options and get an idea of the upper limit of your price range on mortgagehouse.com.au.
Don’t make the mistake of focusing exclusively on your monthly payment. They may seem pretty low and therefore affordable, but if it means you end up paying for longer, you’ll be losing money because of compounding interest.
You’ll also want to budget for fuel, insurance, registration, servicing and tyres. Insurance will most likely be one of your highest ongoing costs, and it also depends on the type of car you choose and its price. The insurance company will also factor in the cost of repair for the car and how popular it is with thieves. If you opt for a low-cost insurer, make sure you read the fine print. Some of them won’t use genuine parts so you want to check if you’re comfortable with what will be going into your car if an accident were to happen.
New or Used? the Age-Old Question…
After you’ve calculated your budget and you know how much you can afford to spend on a new car, you can ask yourself if it really needs to be brand new. Most articles and books about saving money will tell you that it’s always better to buy used. That’s because the rate of depreciation is highest in the first three years. It’s a well-known fact that a car loses up to 20% of its value as soon as you close the deal and drive it home. After three years you can sell it for about half of what you paid. Of course, not all cars will depreciate at the same rate, and there are lots of online resources you can use to determine the depreciation rate of your favourite options.
Buying a new car, although it’s more expensive, does come with some benefits. Since it’s new, it makes the purchasing process a lot less stressful. You don’t have to worry about the wear and tear the previous owner has caused, so it’s much simpler to compare offers and know how much the car is worth. Moreover, getting financing for a new car is much easier. Car manufacturers tend to offer all kinds of incentives, such as lower interest rates so they can attract more customers. The negotiation process can still be a pain, but if you’re good at it, you can bring down that scary sticker price by a lot.
If you buy a new car, you also have the benefit of a warranty, free road assistance and you’ll have more options when it comes to colours and features.
When you buy a used car, you’ll need to be more flexible and compromise. You may not get the colour and features you want because what’s important is that you get a reliable vehicle, in good condition, for a good price. On the other hand, since the price is lower, you can go for higher classes of cars.