Buying a car has a significant financial impact. If you are not ready, you will really struggle to make both ends meet. With this, it is important that you know things to consider before purchasing a car. At the end of the day, you can make an informed decision.
Here’s a list:
The average cost of the car
You must know at the onset that the average price of a new car is around $31,000 while the average price of used cars in montclair is around $19,000. If you want to buy a new car, you should deal with depreciation.
Keep in mind that as soon as you drive a new car off the lot, there is already 11% depreciation on its value. With this, new cars take larger depreciation hit compared to used cars. Simply put, new cars lose their value quicker than used cars.
Your financial situation
Picking used car is a practical thing to do. Even if used cars are way cheaper, you should at least evaluate your financial situation because the cost will also involve repair, regular maintenance, gas, and insurance. It is imperative that you consider your budget before shopping for a car.
You can follow the following guidelines when it comes to determining how much you should spend on a car:
- 10% rule: this is a conservative approach but it will allow you to save more money every year. According to this rule. You should stick to 10% of your annual salary when you determine the cost of your car.
- 36% rule: this rule states that only 36% of your annual salary should make up your total loan payments like mortgage, student loans, credit card payments, personal loan, and car loan.
- 20/4/10 rule: this rule suggests that you put 20% down payment, finance the car for no more than 4 years and keeping the payment less than 10% of your salary.
The primary use of the car
If the car will serve as your main mode of transportation, you should consider the following things:
- Fits your lifestyle: at the onset, you have to think of the functions you want or need out of the car. Do you need extra space for your luggage? Do you often run carpools? These things can help you choose the right style.
- Fits your needs: if you have a family, the age of the children will play a role in your selection. If you have small children, you need a minivan or other vehicles that are easily accessible. If you are single, you tend to prefer a faster and flashier car. Whatever your needs, give more value to safety.
- Features: aside from safety, there are plenty of features that you can use to improve your driving. Extra features tend to be more expensive but totally worth it.
Other large purchases you will make in the near future
Finally, before committing, you have to think if you will have other large purchases in the near future. On average, buyers keep their car for six years. With this, you have to seriously and carefully consider what you plan to do in the next 6 years. As much as possible, you should limit large purchases to cope up with the car payments.