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The biggest advantage of buying a used cars is that you let someone else take the biggest depreciation hit on the car. You may be able to sell your car for nearly the same amount you paid for it in the next few years. You can still find good financing options through your local bank or credit union, and because you are not losing the money on depreciation, you may come out ahead of a zero interest loan that you would take out on a new car.
When you buy a used car, it is easier to save up and pay cash. You can also review the Consumer Reports and choose a model that has been performing well.
Another advantage is that depending on the model, your insurance rates may be lower on a used car as opposed to a new one. If you are in your early twenties and paying high insurance rates because of your age, this may be significant savings.
When it comes time to buy a car, you have a variety of choices available to you. Not only do you need to pick the make and model of your car, you also need to decide if you want to buy a new or used car. This is an important decision and it can make a big difference in your finances over the next several years. It is important to realize that buying a car is not an investment Your options may also be determined on whether or not you qualify for a loan or if you need pay in cash.
Disadvantages of a Used Cars
The biggest disadvantage of buying a used cars is that it may not be as reliable or you may need to do more repairs on it. However, you do have the option of buying a Certified Pre-Owned car through several different car companies. As technology has improved cars have become more reliable and many models do not need repairs until they are well over 100,000 miles and close to ten years old. This means that you can buy a car that is three years old and sell it in five years and you may not need to do any major repairs on it. Plus, you can sell it at a price very close to what you bought it for. You may want to set aside a little bit of money each month to cover any car repairs that come up.
Another disadvantage of buying used cars is that you may have to compromise on the color of the car in order to get the one with the better history and mileage. When shopping for a used car, you need to be more flexible and more patient as you hunt for a car. You can also expand your search and look for the best price on available cars.
Advantages of a New Cars
The advantage of buying a new car is that you are buying a car that generally comes with a warranty. Most new cars will have very few repairs in the first few years, so you can focus only on the maintenance of the car. The dealer may also offer financing at a lower interest rate, which can reduce the amount of interest you pay over the life of the loan. These are the most basic advantages.Another advantage is that the new cars will have the latest technology, which will mean that you may find cars with better gas mileage and lower emissions. You may be able to buy a hybrid and reduce the amount you spend on transportation each month. Additionally, the new cars tend to hook up to your phone and other devices with more ease.
Disadvantages of a New Cars
The biggest disadvantage of buying a new car is that you lose money on it as soon as you drive it off the lot. A new car takes its biggest depreciation in the first two or three years. This means that you are basically throwing away several thousand dollars that you will never be able to get back. Financially it does not make a lot of sense to buy a new car unless you have money you do not mind losing.
Another disadvantage is if you buy a car that is a brand new model. There may be a year when they switch engines or alter the design and that model and year tend to have more problems. If you buy used cars you can avoid that issue.
Making the Decision
Everyone will need to decide for themselves what the best option is. No matter what you decide you should either pay cash or make sure that you can afford the car. A good rule of thumb is that you should be able to pay the car off completely in a three year time period. If you cannot afford the payments at this rate, you most likely cannot afford the car.
You should also do your research and make sure that the model you choose has good reviews and is reliable. If you know nothing about cars, then you should have a mechanic look over the car for you, particularly if it is used. Make sure you shop around for the best loan on the car if you are borrowing money to purchase your car.
When buying your first car, you may spend hours poring over the different makes, models, dealers, even colors of your potential new vehicle.
But when shopping for a new and first car, it is just as important to shop around for a car loan. You can often find a better interest rate through your local bank or credit union than you would find with dealer financing. Additionally, if you are not financing through the dealer, you may have more negotiating power to lower the amount that your car costs. Read on for our best tips on how to buy your first car.
Buying your first car is a big financial commitment. It is important to carefully consider how much you can afford to pay for the car. Additionally, you need to look at how the value of your car will change over time. Here are five basic things to consider which will help you avoid making mistakes when you buy a car. Your options may be different if you do not qualify for a car loan.
The first thing you should do is determine how much you want to borrow. You should calculate how much you are willing to spend on a new car based on how much you can afford. A good rule of thumb is to spend only what you can easily pay over a three-year period.
Naturally, how much you can afford to spend on a new and first car will determine what type of car you decide to purchase. Be realistic about what you can afford and don’t stretch your budget too much. It is important to keep your budget top of mind when buying a car and not get swept away by the excitement, as it will help you avoid some of the mistakes people make when buying a car.
Shop for a Loan Before You Shop for a Car
Once you’ve established your budget, you can begin looking for a loan. Many lenders will not guarantee a rate until you sign the papers, but they will give you preapproval for a loan amount and the current rate. You should begin by contacting your bank. If you are eligible for a credit union, you should check there as well. Be sure to ask about automatic payments and lower interest rates. Most banks will lower your payments if you set up an automatic draft. Don’t automatically go through your local dealer for financing. First, determine if better rates are available elsewhere.
Look for a Car
Now that you’ve established your budget and secured funding, it’s time to actually start looking for a car. You can shop at dealerships, but do not be afraid to look in the classifieds and other online sources. You can find some great deals through these sources.
However, if you do decide to purchase your car from a private seller, you should always have your car inspected by a mechanic you trust before purchasing it. A good mechanic can tell if the car has been in an accident, if it’s been totaled, or if there are any other major problems with the vehicle.
This step is absolutely essential if you are buying from a private seller. If the seller seems reluctant to let you take the car to a mechanic, this should be a red flag. Also, be sure to educate yourself on the differences between buying a new and used car.
Finish Filling Out the Loan Information
Once you have picked out the car and negotiated the price, you will need to pay for your car. You can contact your bank with the final details. Generally, they will need the title or vehicle identification number to process the loan. Additionally, you will need to give them the title once you obtain it from the car’s previous owner.
If you are securing financing through the dealer, you can work out all the details at the time of purchase. However, be sure you are getting a good interest rate, not signing up for any hidden fees, and read the fine print.
Register Your Car and Transfer the Title
Once you own the car you will need to get a new title and tags (license plates) for your car. You can do this at your local DMV office. Most cities have a DMV for driver’s licenses and a different DMV for titles and tags.
Another thing to keep in mind: You will not be allowed to register your car until you have found and purchased car insurance. You will need to take the proof of insurance with you to the DMV.
Tips:
Don’t automatically purchase a new car. A car is a depreciating asset, which means it decreases in value over time. The biggest amount of depreciation takes place in the first two or three years of a car’s life. You can save a lot of money by buying a two or three-year-old car.
Let’s say you’re shopping for your second car. You can make more money by selling your car yourself instead of trading it in. Selling the car directly will likely make you more money than if you would simply trade it in at the dealer.
Do not become upside down on your car. This happens when you rool your previous balance from your trade-in onto your new car loan. This is bad because if you tried to sell your car, you could not pay off the loan with the sale of the car. Additionally, if your car was totaled or stolen, the check from the insurance would not pay off the amount of the loan.
Though not always realistic, it’s much better to save up and pay for a car with cash. It will free up your income since you will no longer have a monthly payment. Additionally, you will be able to save money on interest.
Not sure you actually need a car or trying to save money for one? You may be able to get by with joining a car share for a year or two to save up enough money to buy your own.
Save money on auto financing by knowing your credit score and leveraging competing car loan offers at the dealership. Put money down, keep the term as short as you can afford, and of course don’t buy more car than you can afford.
One of the biggest mistakes people make when buying a new car is forgetting to include the cost of auto financing in the total price.
For example, if you’re buying a new Honda Civic, the difference between “sticker price” and the dealer’s invoice price (what the dealer paid for the car) is about $1,500. If you negotiate well, you could save $1,000 or more on the price of the car.
If you then finance the car loan for four years at six percent with nothing down, you’ll pay over $2,000 in interest. Financing the car for three years at four percent with a $1,500 down payment, however, can save you over $1,000.
If you’re willing to negotiate the price of the car, you shouldn’t ignore the rates and terms of your financing. I made this mistake the first time I bought a car and vowed never to do it again.
If you’re in the market for a new car, don’t wait until you’re in “the box” (what some dealers call the offices where you finish the paperwork) to think about your financing.
You car is not an investment. Quite the contrary: Cars depreciate like crazy. For this reason alone, it’s not smart to pay interest on a car loan. What happens in most cases is that the car depreciates and the value of the car drops faster than you repay the loan, leaving you upside down or underwater (when you owe more on the loan than the car is worth).
That said, many of us need cars to get to our jobs and don’t have the cash lying around to buy a reliable ride. So we get a car loan. That’s cool, but there’s a difference between using a car loan wisely and using it to buy a lot of car you can’t afford.
I have the credit and income to go out and get a loan for a BMW M3. And I would love that car. But that doesn’t mean I should get it. What the dealerships will tell you you can afford and what you should spend are two very different things. Use our car affordability calculator to see what you can afford.
Whenever you finance a car, you want to think about it not just in terms of the monthly payment, but also in terms of the total cost. Here’s what I recommend:
1.Understand your credit score before you go to the dealership
If there’s ever a time to check and track your credit report and score, it’s before you get a car loan.
Here’s the deal: Unlike mortgages or a credit card, you can usually get a car loan even if you have pretty bad credit—you’ll just pay (a lot) more. The reason? It’s relatively easy for the banks to repossess a car if you don’t pay.
But if you have shaky credit, you’re likely excited to even get a loan, so you’re not going to want to ask if there’s a lower rate available. Dealers know this and they make a lot of money on it.
Free tools like Credit Karma can help you understand your credit score. Once you know your credit score, you can figure out if you can qualify for the best car loan rates.
Dealerships will often advertise very good interest rates on new cars: 2.9 percent, 1.9 percent, sometimes even 0 percent. What they leave in the fine print is that these rates are only available to buyers with the best credit—that may mean a FICO score of 750 or better.
Buyers with credit scores in the low 700s can still get a good interest rate but may not qualify for the best promotions. After that, rates rise quickly. Borrowers with below average credit scores (under 650) may be presented with car loan rates of 10 percent or more.
The lower your credit score, the more important it becomes to shop around and make sure you’re getting the best rate a bank can offer you. Yes, you may have to pay more than someone with good credit, but you may not have to pay the first rate somebody offers.
2.If your credit isn’t perfect, get financing quotes before you go
If you have excellent credit and you know it, you can usually get the best financing rates right from the dealership (who serves as a broker for multiple lenders).
Don’t have stellar credit? Try online lenders. You complete a credit application and are presented with your interest rate and a max amount you can spend on the car. The nice thing is you don’t have to use this loan if the dealer gives you a better deal, but at least you can walk through the door knowing that you have an interest rate to beat.
One of our favorite loan matching services is EVEN Financial. When we were considering partnering with them, we tried their services and found that they provide the lowest-cost loans based on your individual needs and situation. You can read our review or try them out yourselves.
Most of the time, local banks and credit unions can offer borrowers with average credit the most competitive interest rates on both new and used car loans. Even better, you may be able to use the pre-arranged financing as a bargaining chip with the dealership’s finance and insurance (F&I) manager and score an even lower interest rate.
3.Keep the term as short as you can afford
Shorter loan terms come with lower interest rates but higher monthly payments. And that’s what you want.
When you walk into a dealership and say you want to finance your car, any savvy car salesperson will try to negotiate with you you based upon your monthly payment, not the overall purchase price of the car. By doing so, the sales rep can show you lower and lower payments by extending the the term of your loan, not by reducing the price of the car. Suddenly a $470 car payment becomes a $350 car payment. And yet you’re not paying any less for the car. In fact, you’ll be paying much more in interest.
The longer you take to repay a loan, the more interest you’ll pay. But that’s not all. Many times banks will charge higher interest rates for longer loans, further increasing your cost of credit.
It’s tempting to stretch out an auto loan over five or even six years to get to a more comfortable monthly payment, but this means you’ll pay a lot more in interest and almost certainly be upside down on your car for nearly the life of the loan.
4.Put 20 percent down
In addition to a short loan term, you can avoid a situation in which you owe more money than the car is worth by putting money down.
This may seem like a no-brainer, but many dealerships don’t even require buyers with good credit to make any down payment at all.
Driving off in your new car without putting a penny down is tempting, but it’s risky. If you find yourself suddenly needing to sell your new car, you may not be able to if you owe more on the loan than the car is worth. A larger down payment ensures this doesn’t happen.
5.Pay for taxes, fees, and “extras” with cash
Do not finance the miscellaneous expenses involved in your vehicle purchase such as sales tax, registration fees, documentation fees, and any extras you choose to purchase like extended warranties.
Often, dealers are more than happy to roll some or all of these fees into your financing. Unfortunately, doing that just ensures you’ll be upside down on your car loan, at least for a while, since you’re increasing the amount of your loan but not the value of the car securing the loan.
Other considerations when financing a car Gap insurance Gap insurance (guaranteed auto protection insurance) is something car dealers and lenders sell you to cover the “gap” between what an insurance company thinks your car is worth and what you owe on your car loan in the event you’re in an accident and the insurer declares the car a total loss.
Without gap insurance, your auto insurer will only pay book value for the car, regardless of what you owe on the loan. If you crash your car and still owe $12,000 on your loan, but the insurance company only covers the car for $10,000, you’re responsible for paying back the $2,000. (And you’re without a car.)
People buy gap insurance out of fear because nobody wants to owe a couple of thousand on a totaled car. But if you structure your car loan correctly (put money down and stick to a three-year term), you can feel confident that you won’t need gap insurance because your car shouldn’t be worth less than what you owe.
Prices for gap insurance vary widely (from $30 or so a year to over $600 for the term of a car loan). The policies the dealers offer may be the most expensive, so if you feel like you need gap insurance, contact your auto insurance agent.
When to refinance a car loan Let’s say you didn’t see this article in time and got stuck with a really bad car loan.
No big deal. If your credit is good and your car isn’t too old, you should be able to refinance your car loan just like you can refinance a mortgage. It’s easy to get auto loan refinancing quotes online with no obligation. LendingTree is a trusted site that offers four to five quotes with one easy application. A local credit union is also a great place to check out options for refinancing your car loan.
Wherever you go, ask about any fees for applying or initiating the loan and avoid lenders who want to lower your monthly payment by extending the term of your loan. With an auto loan refinance, you want to get a lower interest rate and pay down the loan over the same or a shorter term.
Summary Unless you’re looking at 0 percent or another really low APR, the best way to buy a car is with cash. If you have to get a car loan, be as pragmatic as possible.
Know your credits score going in.
Shop for a loan before you go to the dealership and use those offer as leverage to get the lowest APR possible.
Keep the term as short as possible and put money down.
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When someone asks, “What is your dream car racing?” there’s no wrong answer.
Many of us think of that one special car racing, the one we dreamed about owning as a kid, or the one that made our jaw drop even as an adult. We imagine one day being able to walk into a dealership, slap down the cash and drive off into the sunset.
Life is short. Why drive a car you don’t really like, when the car of your dreams might be within your reach? We talked to several people about what it’s like to drive your dream car racing, and they shared their best advice.
Your dream car racing might be a Ford Ranger pickup like the one your uncle used to drive. It might be an adorable Fiat in mocha brown. Or it might be an orange Trans Am with a Screaming Chicken painted on the hood. Trends and taste have nothing to do with true car love.
When you drive your dream car racing, it’s all about the behind-the-wheel feel.
You might like the look of a particular car, but if you don’t love driving it, it’s not going to work for you. Dream cars deserve to be driven, not kept in a garage gathering dust. Darryl H.’s dream car racing for 11 years was a black 1990 560SEL Mercedes-Benz. The 560SEL was a great-looking car, but for Darryl, it was all about the power and comfort behind the wheel. “Even with age, she always had a majestic smooth ride,” he says.
And that’s OK. “My dream car racing for a long time was a VW Beetle, pearl white with the number 53 on its hood. Yep, I wanted Herbie the Love Bug,” says Charles G. But by the time he was old enough to buy one, VW had changed the design — and the New Beetle just wasn’t the same. “When I test drove it, the dream was dead,” he says.
Dream car racing can change.
Then Charles saw the IFA F9 convertible roadster and fell in love. This Russian made beauty was truly the car of his dreams.
A ‘dream car’ isn’t necessarily the most expensive, the fastest, the most powerful or the most beautiful — it can also be all four. Or a combination, of course. Dream cars come in all shapes and sizes; they can be old or new; practical or frivolous. 2018 was filled to the brim with prime candidates deserving of the title.
Dream car racing are often expensive to maintain.
People are often forced to get rid of their dream cars because they simply can’t afford repairs. Ailsa L. inherited a seabreeze-green 1969 Plymouth Valiant from her aunt. The aunt had lovingly kept the car in perfect shape, with only 21,000 miles on the odometer. “Not a lick of rust,” Ailsa says, “but slowly, over time, things began to go wrong mechanically and it became too much to keep her maintained. Eventually I could only get Rush Limbaugh on the radio, the air conditioning stopped working and her engine brackets broke.” If your dream car is a classic or luxury car, put aside cash for repairs in a special fund.
Aside from upping the number of vehicles in their lineups, the next biggest trend for automotive manufacturers seems to be buying, restoring and selling their own classic cars.
Once you buy your dream car racing, don’t let go.
When you talk to people about their dream cars, you hear over and over how much they regret giving them up. “I still cry when I realized the mistake of trading her,” Darryl says of his Mercedes. “I had so many great times with her and spent just about all I made to keep her on the road.”
Karen C., on the other hand, is still driving her dream car: a Volkswagen Cabrio convertible. “17 years and we are still together. Wind. Hair. All good,” she says. The lesson: Save up for repairs (see above), take good care of your car and keep it as long as you possibly can.
Karen C., on the other hand, is still driving her dream car: a Volkswagen Cabrio convertible. “17 years and we are still together. Wind. Hair. All good,” she says. The lesson: Save up for repairs (see above), take good care of your car and keep it as long as you possibly can.
To hell with number-matching parts, this Discovery is as close to perfect as you can get.You could easily spend thousands on flights, rooms and accommodations, or you can just get this pop-up camper.Making a name for yourself in the modern automotive world is nearly impossible. Breaking into the supercar arena is even harder.
Insure your dream car racing to the max.
In 1995 a truck sideswiped Ailsa’s Seabreeze Plymouth Valiant. “The insurance company claimed it was totaled,” she says, “but I fought hard and managed to get $2,000 to get her repaired.” She was lucky — but you might not be. If you’re fortunate enough to drive your dream car, don’t skimp on insurance coverage. Get free auto insurance quotes on compare.com to find out which company will give you the best coverage for the lowest rates.
Better judgment, financial responsibility and myriad other reasons keep many of us from making that purchase, so to find out what it’s like actually drive a dream car off the lot we looked to took to Quora.com — the online question and answer community — to get some first-hand accounts. And while some of the answers fit the bill for traditional dream cars, it quickly became apparent that not everyone’s four-wheeled fantasy is the same.
Achieving a dream, with unexpected results
Quora user Todd Wascom decided a few years back that after forgoing any fun cars for nearly 10 years it was high time to find one. After mulling over his options, he finally decided on a Nissan GT-R. “For the money (at the time) there was literally nothing on the market that could compete with that car in terms of power and handling,” he wrote.
When Wascom and his 10-year-old son arrived at the dealership he said they were treated like royalty and, after proving he could afford the car, took a test drive tearing down Georgia back roads. He drove back to the dealer, bought the car and said he got his first taste of what it’s like to be a D-list celebrity. Porsche owners followed him to gas station to talk about the car, people would stop eating their meal and point to the GT-R when he rolled up, and there was lots of picture-taking wherever he went.
“The sense of accomplishment when you sit in a car like this that you’ve earned is incredible. You’re in the stratosphere. Other men (and women) will slow to admire your car. People lust after it. And the whole time you’re in the drivers seat. This is your car. That you bought. With your money,” then adding, “But that fades to a degree.”
He admitted that when he first bought the car he was looking for a sense of validation. “An expensive car doesn’t validate anything. It’s simply a symbol of your ability to buy something most people can’t. I traded the GTR in that December and never looked back.”
He knows not everyone buys fast cars for validation, and even says he might buy another dream car in the future — but not without a new perspective. “And who doesn’t want to learn a bit about life and one’s self in a world-class supercar?,” he wrote.
Different strokes for different folks
The phrase “dream car” typically conjures up images of red hot, mid-engine, Italian sheet metal, but some drivers look for a bit more practicality in their dream cars. When Simon Holzmanmoved from Great Britain to the U.S. he drove around in a used $800 Ford Festiva for a while, before upgrading to a brand new, emerald green Mazda Miata.
After more than a 11 years of cruising around, the compact convertible still hasn’t gotten old for Holzman. “I have a 20 mile drive down one of the most scenic roads in America, which is the best commute ever. The top is down, my grin makes the Riddler look grumpy and I’m accelerating through corners with joy in my heart.” With a family to take care of, Holzman has no plans to replace his dream car once it dies, and added that if the Miata’s “engine explodes and she crashes 2,000 feet into the canyon below,” he’ll see if he can have the body shop buff it out.
For some of us, dream cars aren’t actually cars at all. “I’m reading all these answers and kinda chuckling, my dream car wasn’t much to speak of. I just wanted a Jeep, a really nice Jeep,” John Gannon wrote. He said growing up his mom wouldn’t let him buy one because she was afraid he’d roll it over — but now he’s older and on his second one.
He put 60,000 miles on the first Jeep be bought and he said he has big plans for the second. “If you’ve never had a chance to drive one, go do it. They’re fun as hell,” he wrote.
Quora user Eric Ruck knows what it’s like to buy an unlikely dream car as well. When he turned 40 he started looking for his must-have vehicle at Maserati, Jaguar and Mercedes-Benz dealerships, and while he says he liked all the cars, he didn’t love any of them. “Remember, you’re not just buying a car for $80-150K. You’re buying the car’s maintenance schedule,” he said. “You better really, really love the car.”
So, after shopping around on the fancy car circuit, he ended up buying a Volvo S80. He admits it’s an unusual choice, but says he’s more than 100,000 miles into his dream car and has no regrets. “Midlife crisis car fail? Maybe. Still love it.”
