The average new car in the United States costs about $36,000, while the average used car costs about $19,000. In the life of the average person, the purchase of a vehicle will be the largest single purchase that a person will ever make, aside from the purchase of a home. Due to the large cost of a vehicle, it is important that a person makes a wise buying decision.
Don’t Payment Shop
Many car buyers shop for a vehicle based upon the payment amount. However, affording a payment and getting a good deal are not the same things. Some experts believe that car loans should be no longer than 48 months. This is due to the amount of interest paid over the life of longer loans. Instead of shopping for a payment, a buyer should look to get the best possible price, borrow as little as possible and pay off the loan quickly. If a loan needs to be longer than 48 months for a person to afford the payment, then the vehicle is probably too expensive for the buyer.
For a variety of reasons, the price of an automobile will vary from one location to another. In fact, the price for an identical new car will often vary from one dealer to another, even in the same city. The Internet has revolutionized the vehicle shopping experience by making it a simple task to shop vehicles from dealers across the country. Though many people worry about buying from a dealership that is not local, new car warranties are usually provided by the manufacturer, not the dealer. Warranty work can be completed at any dealer regardless of where the vehicle was purchased. Used car prices also vary greatly from one location to the next.
Most new and used cars are purchased with financing. The terms of the loan that a person receives can make or break the car dealers in terms of being budget friendly. A great price on a car cannot make up for a high-interest rate. To get the best deal possible, people need to secure financing before arriving at the dealership. Banks, credit unions and other financial institutions offer auto loans. Buyers can become pre-approved for a loan before discussing price with a dealer. There are websites that can help buyers to compare rates from different lenders to find the lowest rate possible. It’s OK to check the financing terms offered by the dealer, but they are unlikely to offer as good of a deal as an outside lender.
Used cars, trucks, and SUVs offer car shoppers the best value available. The value of a vehicle decreases drastically the moment the buyer drives it off of the car lot. In fact, it is estimated that an automobile will lose 20% of its value in the first year. That means that a $15,000 new car will only be worth $12,000 after one year. As modern vehicles last much longer and require fewer repairs than vehicles made in past decades, used cars provide buyers with the most cost-effective manner to own a vehicle. However, while used cars are the best value, there are times that manufacturer incentives for specific vehicles make buying new quite attractive. When buying used, it is always a good idea to have the vehicle checked out by a certified mechanic.
Dealing with the Old Car
When a person buys a new car, he or she will need to decide what to do with the old one. If the vehicle is not going to be kept, the best financial move is for the owner to sell the car on the private market. A car will bring the most money when sold to a private buyer. When selling the vehicle to a dealer, the dealer will pay a smaller amount as they will need to resell it to make a profit. If the car is going to be sold to a dealer, it should not be part of the new vehicle negotiation process. The dealer will generally not provide a good deal to the buyer if they know that there is a trade-in vehicle prior to price negotiations. The old car can be sold to any dealer, not just the dealer where the new vehicle is being purchased.