Getting into the car buying process can be a bit overwhelming. It can be hard to find the right vehicle at the right price, especially if you’ve been bouncing around from dealer to dealer. To make things easier for you, below are some tips to use when trying to buy a car on a tight budget.
Table of Contents
1. Try To Avoid Buying New Vehicles
Although most love the smell of a new car, buying one is usually not good. Most new cars lose around 25% of their value within weeks of being driven off the lot. So buying or leasing a vehicle that has a few miles on it can save you money in the long run. Most used cars are inspected and tested to make sure they meet the standards set by their manufacturer. These vehicles also come with a manufacturer’s extended warranty.
Consider refinancing your current car if large monthly payments make you consider a different vehicle. According to Lantern by SoFi, you can “refinance your car loan and lower your monthly payments.” SoFi will help you get multiple loans offers to compare. When you refinance an auto loan, you will save time and money.
2. Avoid Trading Your Car In
Most people trade in their old car to let someone else buy it. However, it’s a risky move. But, like any business, a dealership wants to make money. To achieve this, they need to purchase a significantly discounted vehicle.
Today, numerous websites allow people to sell their cars privately. So before you sell your vehicle, check its current value with Kelly Blue Book. This tool will enable you to get a good idea of the car’s worth.
3. Avoid Financing With A Dealership
Most of the time, ads for car financing that sound too good to be accurate are usually not very credible. They typically require a substantial down payment and have high-interest rates. If you’re not satisfied with the loan terms, consider getting a loan at a lower rate from another lender. So before you go through with the transaction, make sure that you have a good credit score and can handle the monthly payments.
4. Determine Your Budget
Before you start shopping around, you must sit down and determine how much money you can afford to spend on a car. Some sources suggest that you should only spend approximately 15% of your income on car payments. For example, a car loan calculator can help you determine how much you can afford each month.
Aside from the price of the car, it would help if you also considered the various expenses associated with owning a vehicle. One of these is car insurance. Doing some research can help you save money on your policy. In addition, various websites allow users to compare insurance rates for free.
Despite how uncomfortable it is for some people, negotiating is part of the job of a car dealer. So before you visit the dealership, do your research on the vehicle’s market value in your area. It would help if you also decided on a price that’s the maximum amount you’re willing to pay for the car.
According to Edmunds, a used car dealer usually makes around 20% profit from the sale of the vehicle. Generally, it would help if you offered a lower price than the asking price to get a counteroffer.
Buying a new vehicle on a tight budget is feasible if you do your diligence. Before buying a car, check the vehicle’s history report on AutoCheck or Carfax. This tool will provide detailed information about the car’s previous ownership history.
Also Read: International Finance: 7 Planning Keys