Want to purchase a new car but don’t have the money for it? Or you probably can afford it but you’re thinking of other financing options? After all, you have other things to spend on and not just this, right? Either way, we all want the best deal that will work for us, so here are some tips on new car financing.
An Overwhelming Task
Buying a car is truly no simple decision that you make impulsively. There are so many factors to consider and so many things you have to do. From paying cash straight up, to buying a car on finance, there are also many options available out there that confuse the first time buyer. In addition, you should also be considering running costs. In fact, it’s probably the second most expensive thing you’ll buy after a home. So it’s important to make sure you get the best deal on financing.
Not An Investment
If it’s one thing people keep on forgetting about buying a car is that it is not an investment. In fact, investment wise, it’s the contrary. This is because cars depreciate over time and use, not like homes. For this reason alone, we recommend that it’s not smart personal finance to pay interest on a car loan. What happens in most cases is that the car depreciates and the value of the car drops faster than you repay the loan.
Most of you might not agree that it’s a good idea to use your savings to finance for a car. There is, however, one situation where you should consider it. When interest rates are so low, it’s likely that your savings will not be earning much in a bank. So rather than keeping your savings while choosing to borrow at a higher rate of interest, you could use your savings instead to fund all or some of the costs. However, you should make sure that you have enough savings left over for an emergency after you have paid for your car.
A Personal Loan
Another alternative is to get a personal loan from a bank. Other sources of personal loans include a building society or a finance provider. Just remember that the possibility of borrowing will depend on your credit rating. Also, make sure that the loan is not secured against your home. Otherwise you will be putting your home at risk if you failed to keep up with repayments. What’s good about personal loans is that it can cover the whole cost of the car and it can charge a competitive fixed interest rate too.
- You’re usually better off new car financing from a financial institution, not the car dealer.
- Your monthly car payment should represent no more than 20% of your disposable income. This amount should cover not only your car payment, but also your insurance and fuel costs.
- Long-term new car financing loans will definitely cost you a lot in interest over the long run. The ideal car loan term is anywhere from 3-5 years.
- One of the biggest mistakes people make when buying a new car is forgetting to include the cost of auto financing in the total price.