The 2 Most Important Numbers to Keep In Mindby Tina Lovejoy
When Buying a Car
How many numbers do you have memorized? Your cell number, social security number, bank account number, house or apartment number, the number of days until pay day -- the list goes on.
Well, I have good news for you. When buying a car, you only need to know two numbers.
Start with these two numbers and work out toward the vehicle that will fit within them. That way, you can save yourself a massive headache (and save brain cells to memorize all of your user names and passwords).
It's pretty simple. Here are the two types of numbers to look at when buying a car:
The first number is the initial purchase price.
The initial purchase price is the biggie. This is the price that's on the website alongside the car details, or on the car window at the dealership, or the price the dealer quotes you. It's the one that we all get sticker shock over. It's the number we haggle over. This number is very important. But it's not the only number to be aware of. There's also a number that's less obvious but every bit as important.
The second number is the true cost to own that vehicle.
This number is actually comprised of a few smaller numbers all added together. They are:
Financing How much of the initial purchase price will you finance with a loan? What will your interest rate be?
Insurance Know before you go. Look up the cost to insure the vehicle you're interested in. It's better to know your insurance rate ahead of time than after you've signed the papers and are already locked in.
Fuel Will this vehicle get better, worse, or similar gas mileage to what you're currently used to? Factor this into your monthly budget so you have no surprises a week down the road.
Warranties What types of warranties does this particular model have? Most companies have a basic warranty on new cars from 3 - 5 years. But also pay attention to the drive-train and corrosion warranties. Are there fees for additional warranties you want? If so, what's the cost?
Maintenance This one can be a bit of a mystery. Who knows how a specific vehicle will react to your certain type of driving, in your exact region, with your local traffic and the level of care you give it (including oil changes, air filters, belts, hoses, tires, rotations, brakes?) It's going to be different for each owner. The key here is to pay attention to patterns within makes and models of cars. This is where research really comes in handy.
When you keep these two numbers in mind, you'll stay within your budget. There'll be no buyer's remorse, no freak-outs when the first bill arrives, just good times driving your new set of wheels.
How To Budget for Your New Carby Tina Lovejoy
You've driven your old car about as far as it can go. You've been frugal. You kept driving it long after you wanted to. Now it's time to head to the lot and test drive the few vehicle models you've narrowed down.
The first thing you need to decide on, of course, is your budget which can be frustrating when there's not quite enough money to work with. Budgets are defining because they let us know our financial boundaries. But our budgets are also freeing. When you have a set amount of funds to spend, you then have your parameters narrowed down for you.
Here's a little checklist to see where you're at:
Down payment How much cash have you saved up? Do yourself a favor and really work hard on this one. Do you really need to go out to eat 3 times this week? Stay home and eat potatoes, instead. Then put the cash you would've spent at a restaurant into your down-payment fund. Stash that cash and watch it add up. It may even make you feel like you're saving your allowance again, but this time instead of buying that awesome bike, it'll be an incredible car or truck.
Trade-in Value Your car is what it is. If it's a junker then there's no way spiffing it up is going to get you an extra 15k toward trade-in. But clean up your car and take a good look at it, anyway. Being realistic about what it can actually get for trade-in will prevent heart palpitations when the dealer offers you shockingly less than what you expected. (Use the trade-in tool powered by NADA Guides right on this site to help set and manage your expectations).
Loan term How long do you want to take to pay off this car? Be aggressive in getting it paid off. It'll be a gift to yourself when you're free and clear of any auto debt hanging over you. But be realistic about what you can actually pay, as well.
Interest rates You most likely already know that interest rates for auto loans are amazingly low right now. That's the silver lining in all of this.
Ok, you've got your budget, your down payment, your trade-in, your loan and your interest rates squared away -- now it's time to test drive and buy. You've done your homework. Pretty soon you'll be reaping the rewards of your hard work. Enjoy!