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Tuesday, January 27, 2009

First time car buying: the factors you must consider

This post is written especially for the first-time car buyers, who are willing to apply for a loan to get their dream cars. If you want to get the best rates and lower your monthly payments, then financing your new car purchase would require some financial research work. Exactly what is your affordability for paying for a new car as per your income? Should you finance at the dealer or get a car loan from a bank or credit union? Let us take a look at all these requisite information and the facts you should consider about the car buying process before taking the initiative to go to the car dealerships uninformed.

1. Evaluate your exact financial capability
It is most important step in the car buying process. You must be aware of your capacity to spend to determine your affordability for car. You certainly would not want to end up
making a bloated car payment for it may leave you eating bologna sandwiches for three years. You need to first calculate your total monthly expenses to determine the amount of money remaining in hand out of your net income with which you can plan for any car finance….from there you can chalk out an affordable monthly budget plan for a car. In your budget you will need to include some more expenses than down payment and monthly payments, like- licensing, registration fee, monthly insurance costs, gas, maintenance. Now, finally set a ballpark figure of the budgeted amount you can use for car payments. A popular rule is roughly 20% of your net income can be used for a car payment.

2. Decide your car
Now that you have settled on your planned monthly budget, you can look for and choose the vehicle that fits best into your price range. A good way to make this choice is to choose as per your requirements. If you are a family man, there are a lot of affordable and safe minivans and station wagons on the market. If you are single or do a lot of driving, then the compact segment has a wide range of models to choose from which boast handling and better gas mileage. If you plan to use your vehicle for heavy works, like hauling or delivery then the many light and heavy-duty pickup trucks and vans may best meet your requirements. If you plan on taking road trips, consider something that gives good mileage and has cargo space. For example, compact cars get really good gas mileage and are really preferable for saving money on the increasing gas prices. Plan on going off-roading? The SUV is your best bet.

3. Do your homework
Once you have sorted out a few cars to make your final choice from, it is time to do some car research. The more you know about the car you are buying, about whom you are buying from, and about the buying process itself, the more money you will end up saving.

Plenty of options are for you to do your car research. Check out Internet and newspapers, contact local banks, car dealerships, credit unions to see what kind of deal you can get.
Consider the interest rates banks are offering. You will try to get the lowest possible interest rate for your car loan, as it means lesser payments in the long run. Many car buyers usually are interested only in the lowest possible down payment. But if a car dealer offers a low down payment and shows you some present “savings” you will be charged a higher interest rate.....which means you will end up paying more in the long run.

Also be aware of factory-to-dealer incentives. The maker refunds a fixed percentage of the car's price to the dealer. So even if the car dealer sells you a car at the invoice price, he or she will still make money from the deal. Try to find out the incentive percentage of your car’s manufacturer, because you have the right to know this public information.

You should also watch out for car rebates, if applicable and valid on your car. There are times when automakers offer the buyer a cash rebate and a low financing rate, or an option of one of the two.

4. Venture out to car dealerships
Now you have a clear idea of the type of car you want, your affordable car budget, possible price range you will be offered, and what different car dealerships are offering. Now you may be ready to go to the car dealerships.. This is the needful information you should carry into the negotiating process. But remember: Car dealers are professional negotiators, they do it everyday, are much smarter and have tighter command that you over their working will be considered as a novice by them. So they will not show you all the ways you can save money. It's up to you to find all of those. But you should never worry while walking in and starting negotiation with them…..always remember that you have the right and ability to stand up and walk out of dealer’s office at any time, and the dealer will lose the sale. Just do not let a car dealer intimidate you…be relaxed and comfortable while into negotiation.


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