Whether you’re looking for a brand new car, or a used car that’s new to you–there are many things to consider before you purchase. There are pros and cons to buying new cars, just as there are pros and cons to buying used cars. Realizing the best option for you is the first step.
First off, when purchasing any vehicle, ask yourself “Why am I buying this car?” Is it for daily use, will you need a lot of storage space, seating space? Make sure the makes and models you narrow your search down to are practical reflections of how you will use the car.
You may love the look of a larger vehicle, but you might not need that much space and it may not be right for your daily commute and errands.
After you’ve considered the personal aspects of which car to buy, move on to the less subjective parts of the process:
1. Depreciation
Most cars depreciate at about 15% per year. With new cars, there is a 20% depreciation rate as soon as you drive off the lot. You want to consider this before you decide to buy a new car, especially if you can’t put much money down as a down payment. Chances are you’ll be upside down on your car loan almost immediately if you’re financing the entire cost.
2. Cost-to-own
Also, consider the true cost to own the car you’re eyeing. These costs include insurance, fuel, maintenance, and more. Maintenance costs vary by manufacturer and model. Do your research—some manufacturers have better reputations than others. Some new cars even come with “free” maintenance plans for the first couple of years or for a certain number of miles.
3. How much can you afford?
Don’t guide yourself solely by what the dealership is willing to lend you. And, don’t be blindsided by an attractive low monthly payment—oftentimes tied to a super-long loan term. Consider all aspects of financing—the total amount you are going to end up paying for that vehicle when it’s all said and done. That’s what matters.
It’s a good idea to talk with one of our Liberty Savings’ Loan Officers before you even step on the lot. As a not-for-profit financial cooperative, we can approve you for an auto loan that fits your circumstances—and your budget. We won’t put you into a loan you can’t afford, and we’re happy to explain everything to you away from the high-pressure of the dealership. Learn the differences in buying from a dealer or financing with us, and be one step ahead when you start looking for your new vehicle.