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If you are intent on staying out of debt, you want to practice smart spending at all times. That does not only mean you buy only what you can afford. It also means learning how to say no even when you can afford to buy something in cash. It means taking in credit but strictly borrowing only what you need.
Some people think that taking in credit is not smart spending. In truth, cash is still better. However, there are purchases that you cannot afford to buy in cash and thus you have to get a loan for. It is alright to get yourself in debt as long as you understand the rules and you know how it should be paid back.
You should be careful when you add more debt - especially when you are borrowing something as expensive as buying a car. You may want to consider doing something about any multiple credit cards that you may have. It might be a good idea to consolidate your credit card debts to possibly lower your interest rate. That way, it will be easier to deal with all the debt that you will take on after the car loan is approved.
How to be smart when buying a car
It is tough to implement smart spending when buying a car because you are buying something that loses value over time. But while it depreciates as soon as you drive off the car dealer, it is a necessity especially when you have a family and small kids.
Because it is a necessity, it means you have no choice but to buy it. Here are suggestions on how you can be smart when buying a car.
Try not to buy through credit if you can.
The best way to buy a product that depreciates over time is in cash. Just save up for it. When you buy it in credit, you have to pay additional interest and other fees and by the time you finish the payment, the value is already lower than what you paid for. It is still best to buy things in cash so you only pay for the right value of the car. You don’t have to buy an expensive car because not everything that is costly is automatically better.
Look for a low-interest rate loan.
If you have to get a loan, make sure you get the best deal that you can. That means looking for a low-interest rate loan. Before you go to the car dealer, shop around for credit. Doing so will help you determine the amount that you will be approved for on a loan. If you cannot find a low-interest rate because of a bad credit score, postpone your car purchase until you can build up your credit.
Buy only what you need.
Don’t buy what you want and also, do not base your purchase on what you can afford. For instance, if you can afford a $10,000 car, you don’t have to base your purchase on that. Just buy what you need - even if it is a used car. Just make sure that you keep in mind the purpose for that vehicle. If it is only to be used on weekends, a used car may be alright.
Cheap is not always the best deal.
Although we do not want you to buy expensive cars - do not go for the lowest price immediately. As mentioned, consider what you will use the car for. If you will use it for long drives all the time, then you need a sturdy car for that. But if it is merely for city driving, then a used car could suffice for your needs.
Time your purchase.
Know when you can negotiate for the best deal. Usually, car dealers are more desperate to make a sale at the end of the month to meet their quota. This is the best time for you to negotiate the price that you want.
Identify the costs of owning a car
The price of the car is not the only expense that you need to consider when you are buying a car. Your expenses will grow because your car will need maintenance and occasional repairs. If you don’t spend money on it, you could be endangering yourself and your passengers. You need to be careful about all of that.
Here are some of the things that you need to spend on as a car owner.
Auto loan payments
If you got your car on credit, you obviously have to pay the monthly dues as indicated in your loan term. Try not to be late or intentionally default on payments because your car may be repossessed.
There are different types of car insurances and you want to select one that will suit your needs and the way you plan on using the vehicle. It is also your protection against unexpected breakdowns or accidents that can possibly happen. That way, you will have the finances to pay for these emergency situations. Try to budget around 5% of the purchase price for your insurance.
When you buy a new car, you have to register it in the state and that entail costs.
It is smart to put aside an amount every month for car repairs. That way, you don’t have to borrow money or give up the convenience of a car when it suddenly breaks down. There are certain maintenance costs that are not included in the insurance so you need to be prepared for these.
There are also additional costs to accessorize or improve the looks of your car - especially when you bought a used vehicle. But these are not really a priority.
Before buying your car, use the online auto loan calculators like the ones from Cars.com. That way, you can check if your monthly budget can afford your payments.
Here is a video that you can watch from Howcast with tips on how you can negotiate for the purchase of your car.