Here’s a fact of life: buying a car will be expensive. Don’t make it more expensive than it needs to be by ignoring the tips that Tom and Brendan discuss during this week’s Mullooly Asset Management podcast. You don’t want to neglect these car-related, financial planning principles. When it comes down to it, they’re mostly rooted in basic math but something about the car buying process makes people go a little crazy.
Don’t think basic math can help when buying a car? Try this. Before you sign any type of lease, break out a calculator. Take your monthly payment and multiply it by the number of months on the proposed lease. Add in any down payment you’ll be making. Take that number and subtract the price you agreed upon with the car salesperson. People are usually shocked to see how much more the car will cost. Basic math.
Some good things to remember when buying a car are:
- Shop around! This should be obvious. If a car sits on the lot for a while, it should cost you less to buy it.
- Don’t get hung up about the rate you’re getting. Figure out the math before going to the dealership. You’ll find that rates will not significantly change your payment in most cases. Use an auto loan calculator tool like this one: http://www.autoloancalculator.com/
- If you have the chance to pay off a car loan early, do it! A car depreciates in value every single day.
- Avoid adding months to your loan. Going out further in time kills any benefit to your deal.
- Avoid six and seven year car loans. These used to only be for brand new Mercedes and BMW’s, but now they’re widely offered. Again, avoid these!
- Owe money on your trade-in car? Try not to add that amount onto your new payments.
- Try your best to put as much money down as you can at the time of payment.
Make sure to listen to this week’s podcast! Tom and Brendan give some helpful examples that expand upon the points listed in this post.