Whether you're actively in the market for a new or used car or simply thinking about your next automobile, thinking about all aspects of your car-buying decision could help you make the best choice. Not only will you have to consider the finances behind purchasing a car but also the future wear and tear of your vehicle.
Here are five factors to consider when buying a new or used car:
While used-car buyers tend to outnumber those looking for a new vehicle, you should decide whether your budget will allow you to buy a new or used car. Before looking for cars on the Internet or at dealerships, establish a budget that takes into account your income, ability to meet principal and interest payments and your requirements for a vehicle. Although you may think you will be able to get a quality used car at a fraction of the price of a new vehicle, prices may be higher than you anticipated. Edmunds.com noted the average price for a used car reached $16,800 in 2014 – its highest level ever, USA Today reported.
"The average price for a used car reached $16,800 in 2014."
2. Repayment Terms
As you narrow down your options for automobiles, consider whether you will be able to afford higher interest rates depending on the terms of your auto payments. According to Edmunds.com, while the average purchase price for used cars is lower than that of newer cars, interest rates for loans for used cars are usually higher than for new cars. The site uses the example of a five-year loan for a new vehicle with an interest rate of 2.99 percent. If you put down 20 percent of the total price of $24,983, you could end up paying $396 per month for the loan. On the other hand, a four-year loan for a used car with a purchase price of $17,108 and 10 percent down will result in a monthly payment of $372. Consider the payment terms and conditions for your new or used car and decide whether you will be able to make auto payments on time.
3. Credit Score
Your ability to secure financing for your purchase is often dependent on your credit score. Consumers who have great scores tend to have the lowest interest rates because creditors view them as less of a risk than ones who have poor credit histories. Request your credit report from one of the three main credit reporting bureaus to see where you stand for both your loan application and potential credit offers.
Another factor you should consider is the condition of the car, which could influence its performance and durability, Cars.com noted. Manufacturers often offer warranty coverage for three years or more for new cars. You could also benefit from a warranty for a used car by purchasing a pre-owned car from a dealership and receive the balance of the warranty. Check the mileage of the used car as well as any issues that could affect its safety rating and available warranty.
5. Maintenance Requirements
In addition to your auto payments, you will also have to consider the maintenance and repair costs for your new or used car. Older cars tend to require more maintenance and it may be more difficult to find necessary parts.
Tips to Save Money On Your Next Car
With the high price of buying and maintaining a new or used car, use these tips to conserve cash:
- Negotiate with dealer. Before you sign on the dotted line, be sure to negotiate the purchase price with the dealer. Look up the market price of the make and model year of the cars you are thinking about purchasing before you walk onto the car lot or buy a car second-hand from the owner. Knowing the price as well as the history of used cars could help you cut down on the price and as a result, monthly payments for the vehicle.
- Improve your credit score. If you have a while before you need to apply for an auto loan, use simple techniques to raise your credit score, such as building your on-time payment history and growing your mix of credit types. You can also make sure to keep your accounts in good standing and avoiding negative marks like late payments.