If you’re looking to buy your first car, you’ll want to prepare financially for the investment and be sure you’re buying wisely.
Some people believe that buying a new car is never a good investment. This is because it immediately loses considerable value the moment you drive it off the lot. These can leave you upside down in the amount you owe the bank versus the value of the car.
Others consider that new cars come with service programs and are less likely to have engine problems. So, they think new cars are worth the risk.
Still others always buy late-model used vehicles while other car buyers value driving a classic.
Whichever type of car you’re shopping for, the money strategies are basically the same. Here’s what you need to do to prepare for buying a car.
Save Up
You can work hard and save up until you have enough cash on hand to buy the car you want straight out. This is probably the most optimal money strategy for car buying since it could save you big money in the long run on interest charges.
Saving up for a car also eliminates factoring in a car payment in your household budget.
For an idea of how much you should save, head over to Cars.com for a retail value on the car you have in mind. This will give you a savings target.
Explore Financing Options
Not everyone can or is willing to wait as long as it takes to save for a vehicle purchase. Hundreds of financing options are available for car purchases. Some of these include financing directly by car dealerships, loans from banks and credit unions, and third party financing opportunities mostly for buyers with troubling credit history.
These financing options will cost you more in the long run because you will pay interest on the loan on top of the cost of the car. Shop for a great interest rate, and if you can, let various lenders compete for your business to get the best rate possible.
Before you finalize the sale, you can estimate your payments at Cars.com to be sure the purchase fits within your budget.
Rent to Own
Renting to own cars is probably the most expensive way to buy a car. But, some people with poor credit don’t have other options available. Almost every town has a small car lot or two that sells cars this way.
Interest rates on these types of car purchases tend to be very high. Plus, payments are sometimes required weekly or bi-weekly. But, this scenario does make it possible for some people to buy a car who wouldn’t otherwise qualify.
When you get ready to buy a car, make sure you explore all of the options and choose whichever one makes the most sense for your financial situation. No two situations are the same, which is why there are so many choices to help you buy your first car.
How did you pay for your first car?
Photo courtesy of: MatanVizel
Wise Dollar
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