Getting Your Finances in Order Before Purchasing a Car

Posted by admin on March 23, 2010

Buying a car is the second largest financial purchase you’ll make in your life next to your home.  It’s essential to make sure your finances are in order before taking the plunge. 

Research
It’s never too early to begin planning your next automobile purchase.  Do your research and find out what dealerships in your area have to offer.  Check online for prices, specials, and what the dealer can offer you after your car is purchased.�
Is it going to be a long-standing relationship afterword, or will you be forgotten as soon as you leave the lot?

Make sure you’ve chosen the right car.
Though this is really obvious, be sure you’ve chosen a car that you’re 100% happy with. You don’t want to be stuck with vehicle payments for the next few years on a car you aren’t happy with.  Check out reviews online, read consumer reports; take your time in choosing – this is a big decision.

What’s better for you?  New, Used, or Lease?
Purchasing a new or used car is a matter of personal preference.  When you lease a car, your monthly payments are lower than buying with an auto loan.  If you don’t have enough money for a down payment, or if you trade your car every few years, a lease may be perfect for you.  Many dealerships make purchasing a new car possible by offering 0% financing on vehicles.

Decide how much you can pay.
Once again, do some research online and find the best deal available.  Don’t buy more than you can afford – remember: the monthly payment may sound nice, but be sure to calculate the total cost of the vehicle.  You don’t want to get in over your head. 

Consumer reports suggests:  To get a ballpark figure for the monthly payment, Consumer Reports’ financial experts recommend that your total debt payment be no more than 36 percent of your gross income.  Going by this rule, you can use the following steps to determine how much you can afford:

• Calculate what 36 percent of your gross monthly income is.
• Itemize and total all your monthly payments, including your mortgage or rent, credit card bills, and other installment loans.
• Subtract the total of your monthly payments from the 36 percent figure.

By following these steps you will have the ability to obtain a car you love that will last you for years to come.