By; Nate Miracola
Many people make different purchasing decisions when buying a car. It could be through a lease or a loan. This blog post will be about how you should get your car and the best tips for you in the future
One of the most common mistakes people make when buying a new vehicle is failing to include the cost of auto debt finance in the overall price.
For instance, if you buy a new Honda Civic, the difference between the "sticker price" and the dealer's invoice price (what the dealer paid for the car) would be about $1,500. When you bargain well, you can save $1,000 or more on the vehicle price.
If you then finance the car at 6 percent without anything down for four years, you will pay over $2,000 in interest.
Your car is no investment at all. Quite the contrary: like crazy, cars depreciate. It's not smart to pay interest on a car loan for this reason alone. Think about it, what happens is that the car depreciates and the car's value falls faster than you repay the loan, leaving you upside down or underwater (when you owe more than the car is worth on the loan in the future thus you lose money ).
That said, to get to our workplaces, many of us need cars and do not have the money lying around to buy a reliable trip. So, we're getting a car loan.
I have the credit and income to go out and get a loan for a BMW M3. And I would love that car. But that doesn’t mean I should get it. What the dealerships will tell you you can afford and what you should spend are two very different things. (moneyunder30.com)
If there’s ever a time to check and track your credit report and score, it’s before you get a car loan.Here’s the deal: Unlike mortgages or a credit card, you can usually get a car loan even if you have pretty bad credit—you’ll just pay (a lot) more. The reason? It’s relatively easy for the banks to repossess a car if you don’t pay. Ways to get a car with bad credit is by getting financing quotes to lower your interest rate. (nprsmartwaycar.com)
Keep the term short because even saying you're going to have less money to pay for payments you're going to have to pay more interest over the course of a 5-6 year plan. The best plan is between 3-4 years for not too much interest you paying. And you're saving money when you're paying higher monthly payments though on your car.
Put 20% down. This might seem like a no-brainer, but to make any down payment at all, many dealerships don't even need good credit buyers. It's tempting to drive off without putting a penny in your new car, but it's risky. If you suddenly find yourself needing to sell your new car, if you owe more than the car is worth on the loan, you may not be able to do so. A bigger down payment makes sure this doesn't happen.
Depending on what you decide on how to finance your car with leasing or loaning it. These ways can really help you become more financially free in your ride. There are other things to consider as well as how to pay for it but also maintenance/repairs and fuel costs and auto insurance. Also one thing i forgot is pay all your taxes and fees upfront as it will add to your monthly payments dealerships do that sneakily make you pay more.
Summary: Unless you are paying 0% or a really low APR, the best way to pay is through cash, if you need a loan or lease be sensible as possible. Know your credit score, shop for the best loan before you sign and use other offers as leverage for lowest APR.keep the term short and read carefully
Tell me what you think, what's your decision ?
Works Cited:
https://www.moneyunder30.com/how-to-finance-a-car-the-smart-way
Written by David Weliver , et al. “How To Finance A Car The Smart Way.” Money Under 30, www.moneyunder30.com/how-to-finance-a-car-the-smart-way.
https://www.bankrate.com/loans/auto-loans/best-car-buying-tips/
McMillin, David. “How To Buy A New Car: Get The Best Deal.” Bankrate, www.bankrate.com/loans/auto-loans/best-car-buying-tips/.
https://www.npr.org/2019/10/31/774757867/5-tips-for-buying-a-car-the-smart-way
I agree with your post - even though your dream car looks amazing in this moment, in a few years while you are still paying off the loan, there's a high chance that you're going to find another car even more attractive than the car you have your loan on. So, you'll be in a never ending loophole of a new car - loan - new car ... So, it is probably best for majority of the population to buy a car that is easily affordable, and it's okay to take out a loan - just make sure it's not entirely out of budget and pick the shortest term length for the loan as possible.
ReplyDeleteIn my opinion a teenager who has typically just gotten their license should consider the facts about getting a car. A teenager's first car shouldn't be bought new because there could be risk of them getting in a car accident, but it also shouldn't be so broken down where they'd have to constantly make repairs. I'm sure everyone has a dream car that they've always wanted since they were little, but taking the safe road so that you don't risk paying off a $50,000 car note especially while you're young. However, a question that I've got is, when someone buys a car do they have to pay for car insurance too? Can teenagers pay for car insurance if they plan on buying a car? When buying a car do they look at your credit score to determine whether or not you are eligible to buy a car?
ReplyDeleteI agree with everything you've said. Buying a car comes with all different types of risks and fees. I think it's crazy how you can buy a new car and the next year, it's worth nothing like you bought it for. Because of this, I always wonder why people buy brand new cars. If you have more than enough moeny to buy a new car, then you can do it, but if you were financially thinking about it, it's not really worth it in the end. Something I didn't really understand before reading this article was a down payment but you explained it simple but good enough for me to finally understand what that means and why you should pay a down payment on a car. Also I agree with you, why choose a long term length to pay off a car. You'd be paying so much interest and by the time you sell the car, you'd be spending way more than what you bought it for. Good job creating a blog post that was simple to understand but very informative on the costs and risks of buying a car.
ReplyDeleteThis post was interesting to read and realize how much loans can effect your future spending. From just the work we have done in this class, it is obvious that loans can be dangerous when thinking about the longevity and final cost of the loan, or the interest that will be accumulated at the end of the loan payment period. As an early driver, it is important that I know these things before going out and buying a car in the future. I noq understand, that similar to mortgages, you want a loan that can be paid off in the shortest amount of time possible, and you want to pick out a car that is most affordable at that point in time.
ReplyDeleteIt's very helpful that you chose to write about this topic because many of us teenagers don't know much about car financing and sometime in the near future, we will all be getting a new car. I feel like it's common for people to underestimate the total cost of a car because they're letting their heart determine their decisions more so than their head since they want that car so bad, which can really hold them back financially. I like that you included how to go about financing a car in specifics because that can make a money-saving difference for people.
ReplyDeleteThere are so many different components that go into buying a car. The choice to buy a brand new car is also a choice that is hard to make. My dad told me that if you were to buy a brand new car from a dealership, as soon as you drive it off the lot, the amount the car is worth goes down about 30%. This shows why it is smarter to buy a car that is barely used to still get all of the new features at a better price. Also there wouldn’t be as much interest added to the total cost because the initial price/downpayment wouldn’t be as much.
ReplyDeleteI thought that your post was very insightful, especially because the information in your post is not only applicable for myself, and most teenagers, today, but it is also applicable to my future self when I decide to get a car of my own. Currently, I have a car, but my parents pay for it. Because of this, I was naive to what to look for when buying a car because my parents were nice enough to do that for me. As I move out and get a job of my own, however, I will need to know what to look for when purchasing a car since my car will be given to my sister. One of the best tips I thought you gave in this post was to pay with cash if you have a loan with little to no APR. I also thought it was helpful when you mentioned most auto costs that most people don't think about when purchasing a car, like auto debt finance, because those costs could be ones that could harm you financially if you don't look out for them. When I look into buying a car of my own, I will be sure to look back at this post for guidance.
ReplyDeleteBuy a car is a lot more intense then I ever knew. It amazes me what dealerships will tell you and try to get you to pay such high interest just to make more money off you. I feel like this was a super good read because one day I plan on buying my own car and you gave some great tips, put a down payment of 20%, opt for a short term, and pay in cash. Overall great work!
ReplyDeleteOne thing I strongly agree with is that you shouldn’t just buy your dream car because it will cost you a lot of money in the moment as well as in the future. The best way to save money is by buying a used car for cheaper and to only look for things you feel you need in a car and not what you just want. I also agree that the best plan for a car is 3-4 years because then you don’t have to pay interest for a lifetime. Good job on your blog. I really liked hearing about car finances from a blog as there wasn’t a ton of blogs that talked about car financing.
ReplyDeleteI completely agree with this post. I believe that one of the most helpful things that we learned about buying a car in class was to choose a payment term that is the shortest that you can afford. I think you did a really great job explaining this. I would plan to buy my own car and put a down payment of 25% if possible.
ReplyDeleteGreat Job Nate! This was an awesome blog to read for my last one of this class! I thought this was a very beneficial topic for our final Personal Finance semester project. One thing I noticed is that most plans are 5-6 years, but you want to shorten it to 3-4 years. I thought this was a great point because then you are saving money in the long run. Interest builds the longer it takes you to pay off your loan. That was a great point. One thing I’d like to add is making down payments on your car and loans in general can help pay it off. Awesome Job!
ReplyDeleteI agree with this blog post because you don't need flashy cars if you are just gonna be paying it off for the next 5-10 years. Get a car that's full functioning for you no matter the looks. As long as it get what you need, you're settled. Good job!
ReplyDeleteThis was an informative post and one that everyone should be aware of. Before reading this post I had some idea about car financing but this post gave me clarity to better undestand this topic. I agree that you should pick a loan that make sense to you and one that doesn't gain more interest in the long run. When buying a car keep in mind the numbers and do not be blinded by just the car so you will not be surprised by the overall costs. Great Job!
ReplyDeleteFor someone who doesn't know much about this topic, I felt that this blog was really helpful and definitely something to keep in mind for the future. This is another instance were many people might think they are saving money by not paying interest, but really its just the better deal. I also strongly believe that it doesn't matter what kind of car you drive as long as its clean and gets you from point A to point B.
ReplyDeleteThis really shed some light on a subject that I don't think about often but is something important to keep in mind. Us high school students are all around the age where we can get our license and also our first car so reading this was very helpful when it comes to car shopping. Thank you and nice work!
ReplyDeleteThis blog was very helpful to me, as it's definitely something that I can keep in mind and be able to look at into the future. After reading this post, it made me better understand about car financing as I had very little knowledge before reading it. I agree with the dream car statement, as although it looks nice and something we want to drive, it's still a lot of money.
ReplyDelete