Savvy Car Buying: Why Affordability Matters as Much as Make and Model
Posted by : Premraj | Posted on : Wednesday, April 19, 2017
It is all too easy to be blindsided by the badge and motivated by the model that offers you loads of hi-tech gadgets as part of the spec, but if you want to be a savvy car buyer a key aspect of your decision-making process should be affordability.
Here are some sensible tips and strategies to help you get the right car that doesn’t just suit your lifestyle and needs, but just as importantly, a make and model that suits your budget.
There is a look at some worrying statistics regarding car loan payments and delinquency levels which should help you reflect on the importance of budgeting, plus some useful tips on how to choose the right auto loan.
The state of the market
Consumers are feeling the pinch and this is reflected in the state of the automotive finance market which is witnessing rises in the number of people in arrears with their auto loan payments and a sharp spike in the rate of auto repossessions.
You don’t want to think about these consequences and probably don’t even think they apply to you when you are visiting the showroom and checking out the cars available, but the statistics do highlight the need to take a prudent approach when it comes to borrowing money to buy your car.
It is always sensible to find out about auto loans and the options available and it is equally as wise to do your math and work out exactly how much you can afford each month before you start shopping for a car.
Check your profile
A good starting point would be to check your latest credit profile and see how good your score is at the moment.
This is a highly relevant piece of information as the better your credit score the more competitive the finance deal you will be offered. You can still get loans with bad credit but lenders will charge a higher rate of interest which reflects the perceived risk attached to you defaulting on the payments.
To get the best loan deal and one that is affordable for your financial circumstances you need to do your homework and check out all your options. That includes taking the time to see what lenders are going to think about the state of your finances when you apply for a loan.
If you take the first deal you find or leave it to the car dealer to find you a finance deal there is a good chance that you won’t end up with the best rates or most favorable terms.
You might get lucky and end up with a decent deal when you walk into the car showroom but that is not exactly a sensible strategy for such an important financial transaction. It is always advisable to shop around for the best rate and be prepared to do the legwork, as you will often be rewarded for your efforts when you secure a better auto loan deal than the first one you see.
It should be a loan not a sentence
You might be tempted to stretch your loan out over a longer period in order to make it more affordable but that could work out to be a costly strategy.
The general scenario in the car industry is that as new cars have become more expensive to purchase car loan repayment periods have stretched over a longer period of time, so it seems like they are just as affordable as ever.
The problem with taking out a car loan over a longer period of time is that you will be paying interest charges over an extended term, which will drive up the total cost.
It is always better to take an auto loan over a shorter period of time. There are two specific reasons why this is a sensible approach, the first is that your car will have a higher residual value if you pay the loan off quicker, and the second reason is that you should end up paying less in finance charges.
Choosing a shorter loan period is going to mean your monthly payments are likely to be higher, but the positive aspects are the loan should work out cheaper and you get out of debt quicker.
Keep it simple
Another good tip would be to resist the extra offers that the car dealer is trying to sell at the time of buying your new car.
They will often want to sell you gap insurance, extended warranties and all manner of seemingly worthwhile extra options, but the problem is that this bumps the cost of your car up considerably and you can often get the same cover for less elsewhere.
If you do want to protect your payments or protect your paintwork, shop around for the best deals rather than taking what is being offered to you at the point of sale, and also question whether you really need some of these extras at all.
If you cover all these angles when you are preparing to buy a car it should ensure you get a more savvy and affordable deal.