Who can resist the smell of a new car? The fresh seats, and the thought of knowing that this gleaming vehicle now belongs to you. But this can continue to remain a dream if you do not prepare yourself financially by covering your basis. Here are 6 things you need to cover before purchasing a car.
The sobering part
If you do not have a budget set in place, it can be easy for you to get carried away. The average amount that Australians spend on cars ranges from $36,840-$75,00 depending on the household income bracket. This means you will have to factor in loan costs if you are planning to purchase your car through a car loan which is the most popular way Australians finance their wheels. Keep in mind that a car is not an investment and can depreciate at an alarming rate. Therefore, you will want to purchase something that you need and is within your financial reach.
Check your credit report
You will be doing yourself a discredit if you fail to check your credit report and your credit score. This is something that lenders use to analyse your level of risk when applying for a loan. A good credit score ranges between 600 and above. If you have bad credit you can still get access to a car loan, but you will be paying a lot more on the interest rate because of this. Keeping track of your credit report and credit score can help you approach a lender confidently and gives you a chance of negotiating a lower rate.
It is easy to get lost in the smooth sales pitch when you are at a dealership, but always compare quotes. There are many alternative car financing options that are safe such as accredited online lenders that you can compare, especially if your credit score is not that great. Check the features and terms that come with the financing option that you are thinking of choosing before deciding on it. This is a process that shouldn’t be rushed, as the type of financing you choose can either make or break purchasing a new car.
What do you need in a car?
The process of sifting through cars that are within your financial reach is also important. Buying a large vehicle that guzzles on fuel, yet you travel long distances and are the only person ever using the vehicle can burn a hole in your pockets. It is important to find a car that fits with your lifestyle and needs. If you are planning to purchase a car that you will resell in a short term of owning it, you will need to consider purchasing a model that has a high resale in the used car market.
Needs vs wants
These can come in the form of value-added extras that can be sold to you through a dealer. These are usually extras that you can get elsewhere at a lower cost or may not need at all. Keep in mind that whatever value-added extras you choose to add will push the price of your car higher.
Read the fine print
Whether you choose to use dealer finance or take out a loan with a lender it is of crucial importance to read the fine print. Check for fees and charges that might come with your financing such as sales tax, registration fees, documentation fees, and ongoing fees which are usually expressed through the comparison rate that is expressed as a percentage.
If You are not sure of terminology or expenses that are added to your agreement it is important to have them explained to you. Speaking to your lender or broker can clear up the air and prevent any disappointments.