The process of buying a car is one of the painful experiences we all go through. Despite all the modern luxuries of life, car buying still involves going to a dealership and having to deal with salespeople who try to sell you an extended warranty and other add-ons.
But there are certain things that are within our control. By controlling what we can, we can make the car buying process less painful.
Here are the common financial mistakes people make when buying a car.
Failing To Plan Properly
The first thing you need to be absolutely certain when buying a car is that you will own the vehicle for at least five years. Ideally, you will own the vehicle much longer to get the most out of your investment.
You need to think ahead when we buy a vehicle. If you are expecting to have a baby, plan ahead, and buy the vehicle you would need to safely travel with the child. If you are unsure about your circumstances, wait until your situation clears up before committing to a car purchase.
The worst thing you can do financially is to buy a car, and sell it a few years later, only to buy another one. First, because the car depreciates a lot in the first couple of years, your trade-in value will be fairly low relative to what you paid for the car. And then, you would have to start the car buying process all over again to buy another vehicle.
Do you need a car or a truck? Or an SUV perhaps? Think through if the vehicle you are planning to buy will work for you in 5 years or so.
Too Much Focus On the Price
Most car buyers simply spend too much time on the purchase price. Sure, it’s important. Between huge markups, and shady dealer practices buyers need to do their research on the price to get a good deal on a car. But there are several other things you should be focusing on as well.
What optional features do you need?
What financing terms will work for you?
Does the car have the safety features you need?
Have you considered the mileage of the car? How much will you spend on gas every month?
Not Considering Total Cost of Ownership
Owning a car for 7 to 10 years involves a lot of costs. You should consider the cost of insurance, repairs, and maintenance. You need to look into the reliability and safety of the car.
Consider reading reviews from Edmunds.com or Consumer Reports to understand the total cost of ownership of the car. Some popular vehicles on the road have very poor reliability metrics and will be a financial pain to own and maintain beyond the initial warranty period.
Buying A New Car When A Used One Will Do
Depending on your circumstances, you may not need a new car. A used car will do just fine for a few years.
There are some people who only buy gently used cars. It may actually be a very good financial decision because the first owner paid for the initial depreciation of the car, and the used car will still be under warranty.
Driving a new car may be flashy. But it wears off after a few weeks as you get used to the car. Buy a car that makes financial sense, and not the one you would like to show off.
Buying a new car is an important financial decision. To get the most of your new car, you will need to own it for a long time. In addition to focusing on the price, consider other factors that are important to you when buying a car, including the total cost of ownership. Proper planning is key to getting the right vehicle for you.