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5 Tips for Buying a Car Without Breaking the Bank
Personal Finance

5 Tips for Buying a Car Without Breaking the Bank

Story Highlights
  • Purchasing a car represents a sizeable long-term financial commitment, with a number of factors to consider.
  • Here are five tips that can help make the car buying process less stressful.

Purchasing a car represents a sizeable long-term financial commitment. With so many factors to consider, it is easy to get overwhelmed and bogged down by the large sticker prices and the finances involved. Here are five tips that can help make the car buying process less stressful.

Understand Your Finances

Your financial situation will determine your car-buying choices, so it is important to understand how much you can truly afford to spend. Creating a monthly budget is a great place to start. Doing so will present you with a straightforward picture of how you are spending your money, and delineate the amount that you can comfortably devote towards purchasing a vehicle.

There are a range of financing options, from paying for the entirety of the car in cash to putting zero money down. Using TipRanks’ Auto Loan Calculator can help you estimate your future monthly payments, and determine whether or not they can fit realistically within your budget.

Figure Out What Type of Car You Need

Figuring out the type of car that best suits your needs is necessary before shopping for specific makes or models.

For instance, your future car might be used mostly to transport you and perhaps one other passenger to and from work and other social engagements, making a smaller sized car and good gas mileage central considerations. On the other hand, perhaps you will be responsible for driving your daughter’s hockey team to practices and games, in which case you will put an emphasis on having sufficient seating and space for equipment.

For some, a car is non-negotiable purchase, necessary for getting to work, shepherding your kids from place to place, and visiting family members. For others, a car can be a luxury, with public transportation, carpools, or even biking satisfying your mobility needs.

For many, having a car is both necessity and a source of convenience and comfort. A car will get you to work, while allowing you the freedom to hit the open road whenever the fancy strikes. However, it is important to dig deeper to understand what you will be using the car for on a regular basis.

The scope of your future car usage matters, and defining this beforehand will save you headaches, hassle, and disappointment down the road.

Research Your Options

There are plenty of car brands out on the road, from the sleek and shiny to the modest and practical. Take some time to learn about the different brands, reading about them online and consulting with friends and family. Chances are that by asking around, you will hear recommendations for makes and models to consider (along with others to avoid).

While new cars are fun to consider, used options could be a more economical solution for those looking to spend less money while still finding a reliable vehicle. If you already own a car, trading in your current vehicle could offset some of the costs of your new purchase. (This figure can be added into the TipRanks Auto Loan Calculator, which will automatically factor it into your loan calculation.)

Remember Other Costs

Beyond the initial purchase price and monthly loan payments, there are additional expenses that come with car ownership. Insurance, gas, and regular maintenance are also part of the car ownership package, and it is important to consider these as well when making your decision.

The monthly budget that you created can help you arrive at some clarity here as well. Though gas prices are a bit unpredictable, you should probably have a good idea regarding the frequency and miles that you will be covering in your car. Also, getting an insurance quote before heading to the dealer will help you understand how much you can expect to pay on a monthly basis. In addition, the research that you performed should also give you a sense regarding the reliability of the models that you are considering (and which ones tend to break down with more regularity).

Get Pre-Approved for a Loan

Because dealerships have an incentive to offer you financing directly, getting pre-approved for a loan from your bank will give you greater leverage during any subsequent negotiations. For instance, if you know that you have been pre-approved for a $20,000 loan at 5% a year, you will not feel pressure to agree to more expensive terms from the dealer. Dealerships make their money by selling cars, but also by offering financing, so they are incentivized to help you finance your car.

Obtaining pre-approval from the bank has the added benefit of giving you an overview of your credit score and overall finances. This is part of a healthy financial routine, and will help you understand if the monthly budget that you created represents a realistic picture of your current financial situation.

Conclusion: Buying the Right Car for You

Buying a car is a big decision and will require a large financial commitment. Understanding your finances, thinking about what you need in a car, researching your various options, factoring in other costs, and getting pre-approved for a loan can help make this journey less stressful, and ultimately more successful.

Using the TipRanks’ Auto Loan Calculator to experiment with different financing arrangements will allow you to anticipate your expected monthly expenses. This will give you a sense for whether or not you can afford your desired purchase, even before stepping foot inside a dealership.

Learn money management, and use data-driven stock insights with TipRanks.

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