1. Cars depreciate…really fast
Not to put a damper on the prospect of getting a new car, but it is important that you know that cars depreciate very quickly. The minute you drive your car off the lot it loses 11% of its value and can lose 30% in the first year. When it boils down to it your car needs to fit your needs and finances. As much as we would like to ride in the latest Mercedes C-class or a BMW M3 range, it needs to be practical and also financial savvy for you. You will have to keep in mind the cost of maintaining the car, how it will affect your insurance and whether it offers you value for your money.
2. Think about your financing options
Even if you have purchased a car before, always evaluate your financing options. According to the Royal Commission, 90% of finance is arranged through finance of which 39% are financed through dealers and 61% from other sources such as banks and private lenders. Try to avoid going to a dealer without having pegged this tip down or you could end up being pressured by sales talk that sounds good, but on closer inspection is more expensive than you anticipated. Whether you are opting to get your financing from a lender, bank, or even a dealer it is vital that you compare your options before settling.
3. Rates and terms
This might appear as a snooze fest of going through the detail of your financing option when you just want an upgrade to happen as soon as possible. However, checking the rates and terms of your loan will let you know whether you are taking something that can be strenuous on you financially or whether you are getting the best deal in town. Low rates don’t always mean you are getting a good deal, that’s why you need to read the fine print and know what you are getting yourself into.
4. Do you have your 20% ready?
It is advisable that you have at least 20% of the deposit ready to finance a car. The reason for this is that it will lower the amount you will need to borrow which in turn makes your loan term shorter and lowers your repayments. If you do not have 20% of the deposit saved up this could be a sign that you are not ready to upgrade to a new car just yet.
5. New vs used
To purchase a new or a used car? Now that is the question. This is the defining factor that will influence how much you prepare financially and what type of models you can choose.
Although new cars can lose thousands of dollars in value the moment you drive it off the lot, it has low maintenance costs and is far more reliable than a used car.
But you can also still get the best quality used cars that are 2-3 years old which is almost as good as new. Which one you decide on will be determined by your situation.