1. Monthly Payment
The first thing that you should never do when you try and buy a car is to think regarding monthly payment. There are not many people who can walk into a car dealership and write a check and buy a car. People who sell the cars know that as well. They also tend to rely a lot on this particular as far as their sales pitches are concerned. This is perhaps one major reason why in most such cases the argument is based on how much you would be able to pay in a month. At the time of negotiation, the dealer would do anything it can to make the car fit into your monthly budget.
It could adjust the rate of interest on repayment, give you a longer period to pay the loan back, or even restructure the payment in such a way that it fits your budget. To start with, it might not look like a big deal. However, even a year extra on the car loan or a few additional percentage points on the rate of interest on repayment could add plenty of dollars – to the tune of a few thousand, in fact – to the total money you pay for the car.
These days, on an average people in the USA (United States of America), are paying between 471 dollars and 482 dollars for a car on a monthly basis. This has been the trend in the last few years especially. This is why you also need to look at where you may be getting with your car-related expenses.
2. Buying a new car
The car that you are buying is never really an investment. At the very least it is not a good one for sure. They tend to lose value at a rather rapid rate. This is why even if you are buying a new car you can expect it to lose value from the moment the title is transferred in your name. It is said that in the first couple of years a car could lose value by as much as 40 per cent. This is why the best thing that you could do in this stage is to let someone else take that 40 per cent hit.
You can do this by buying a slightly used car – it could be a year or two old at the most. There was a time when buying new cars would have made sense – the warranty periods that were shorter. The situation has changed now, however. These days, the cars have longer warranty periods, a fact which means they would be in effect even if you bought them when they are around two years old. Nowadays, if you wish you can also buy cheap extended warranties as well.
This warranty could be a lot cheaper than what was the case when the car was a brand new model.
3. Choosing the wrong car
Are you single? Do you need a car just to go to work and come back from over there? In that case, you would not need an SUV (sports utility vehicle) that costs you 45,000 dollars and is capable of carrying 5000 pounds. While buying a vehicle always focus on one that is suited to your specific requirements. There is nothing to deny that there are plenty of vehicles out there that would turn heads but also keep in mind that they come with a price and a hefty one at that.
4. Not thinking about the other costs
It is always important to focus on the cost of a car. However, people often make the mistake of overlooking other related and important costs such as insurance and maintenance to name a few. Normally, the costlier the car, the more you have to pay to insure it. So, if you buy an expensive car, you would also have to part with a lot of money each year in order to insure the same.
In some cases, this could go up to a few hundred dollars a year, if not thousands. Apart from this, some maintenance costs have to be taken into account as well. You need to change the oil of your car on a regular basis.
Along with you also need to get new brakes, tires, and air filters to name a few. When you buy high performance or luxury models you can be sure that these costs are going to go up as well. In fact, at times in these cars, the replacements could be costlier than the originals. Apart from that you also need to think of the gas that the car would use up to run. Taking all these into account you may have to pay anywhere between 3000 to 5000 dollars a year along with the monthly loan payments of your car.
5. Not making any down payment on the car
You might think that buying a car on loan without making any down payment on the same is a cool thing to do, but that could be one of the biggest mistakes that you make in this regard. You need to know that cars lose their value at the speed of light. So, in case you are not making any down payment on your car loan you are basically financing the entire amount of your car loan on your own. This also means that you owe more for the car than what it is actually worth.
You also need to keep in mind the fact that there are other expenses such as fees and taxes related to buying a car. So, when you are not making any down payment, they are automatically getting included in the loan amount as well. This would imply as soon as you drive a car off the lot without making any down payment for the same as you are driving off with a whole lot of debt on your head. So, in case you want to trade in the car or sell it before the loan expires this would be a bad idea.