When purchasing a vehicle, there are many things to consider before taking the leap such as the pros and cons to buying new cars versus the pros and cons to buying used cars.
Before purchasing a vehicle, think about what the daily use of the vehicle will be, the amount of trunk space you will need, and how much seating space you should have. Make sure the options you are considering are practical reflections of how you will use the car. You may love the look of a larger vehicle, but do you have a need for that much seating? If you do not need that much space then that particular car may not be right for your daily commute and errands.
After you have considered the personal aspects of which car to purchase, move on to the less subjective parts of the process such as depreciation, cost-to-own, and affordability.
Most cars depreciate at about 15% per year. With new cars, there is about a 20% depreciation rate as soon as you drive off the lot. You should consider this before you decide to buy a new car, especially if you cannot afford a large down payment. Chances are you will be upside down on your car loan almost immediately if you’re financing the entire cost.
Consider the true cost to own the car you are considering. There are always costs when owning a vehicle such as insurance, fuel, maintenance, and more. Maintenance costs vary by manufacturer and model. Some manufacturers have better reputations than others when it comes to maintenance. Some new cars come with “free” maintenance plans for the first couple of years or for a certain number of miles.
Shop around. Do not guide yourself solely by what the dealership is willing to lend you. People are often blindsided by an attractive low monthly payment that is usually tied to a super-long loan term – do not be fooled. Consider all aspects of financing so the total amount you are going to end up paying for that vehicle when it is all said and done is something that is affordable. That’s what matters.
Before you even step on the lot, visit DoverPhila Federal Credit Union. As a not-for-profit financial cooperative, we offer low loan rates and flexible terms that fit your lifestyle, and we are happy to explain the lending process and answer any questions you may have about loans.