Whether you plan to lease, finance or buy your car outright, these three tips can be applicable in every instance.
1. Avoid Buying New
Buying a new car might sound appealing. The latest technology, the clean smell, and the single-digit on the odometer make buying a new car all that more attractive. That being said, a new car is typically not a good financial decision. Most cars depreciate as much as 25% within weeks of driving it off the dealer's lot. It typically makes more financial sense to buy or lease a car that has a few miles on the odometer. Even a car that's just one year old with 10,000 miles can save you upwards of $5,000!
Reputable dealerships that sell used cars put them through rigorous testing and inspections to meet high standards set by the manufacturer. These "pre-owned" cars still come with the manufacturer’s warranty so you know you'll be covered if anything goes wrong.
2. Avoid Trading-In
Most people choose to trade-in their car simply due to the convenience factor. They don't want to spend the time and trouble of seeking out a buyer for their existing car. If you wish to get the most money out of your old car, try selling the car yourself.
Dealerships are businesses and as such their primary goal is to make money. They need to purchase your car from you at a "discount" to ensure there's room for them mark up the price and make a profit after they've spent their money on the initial purchase, repairing, cleaning and advertising your old vehicle. There are plenty of marketplaces that allow you to sell your vehicle quickly and safely. A private sale ensures that you get the most value out of your existing car.
Private sale marketplaces include AutoTrader, eBay, and Craigslist. Even if you do decide to take your old car to the dealership to get it appraised, we recommend checking your car's value with Kelly Blue Book first. KBB can help you estimate the market value of a car whether you are trading-in or selling privately.
3. Avoid Dealership Financing
We know you've heard radio or TV ads that scream "Instantly Approved" or "No Credit Checks!" While this may seem like an offer too good to pass up, consider steering clear of those financing options. Most of the time those offers will require a sizable down payment and that you agree to a high interest rate. An alternative can be to check out your bank's car loan rates or visit a peer-to-peer lending platform such as Lending Club.
Debt can sometimes be an inescapable part of life, but you don't have to bury yourself in it to buy a car. There are options available to you that help minimize the amount of debt you incur when buying a car.