Tips for Buying a Car
Eileen St. Pierre, The Everyday Financial Planner
If you are expecting a pause in the number of car commercials on television now that the holiday season is over, think again. Tax filing season began on January 20, which means tax refund checks will soon start arriving. Dealerships will be tripping over each other to try to get you to come in and use that refund as a down payment on a car or truck. Here are some tips to help you get the best deal:
You can receive a free copy of your credit report every 12 months from each of the three credit reporting agencies at www.annualcreditreport.com. See my Correcting Errors on Your Credit Report column if you spot something that should not be on there.
You should also know your credit score. It will determine the interest rate you pay on a loan. Taking steps to improve your credit score can pay off financially in the form of lower interest costs.
- See my Improving Your Credit Score column for tips.
- Websites like CreditKarma and Credit.com offer free credit scores. They promise that you do not need to provide a credit card number, but you still need to provide other personal information.
Get pre-approved for a loan to see what you can afford and improve your negotiating position.
Don’t buy more car than you need! When we finally replaced our 1994 Chevy Blazer this past year, we thought about getting a Cadillac but settled on a new Chevy Cruze LT instead. It cost half as much, uses much less gas, and has leather seats along with other upgrades (I just love my remote keyless entry and start).
Remember, the more money you put down, the lower your payments. Don’t get lured into lengthening your loan term too much – yes, it will lower your payments but you will also end up paying way more in interest for the loan.
Research available options in your price range and don’t be afraid to consider a used car.
Compare operating expenses such as gas and routine repairs. Can you use regular unleaded gas or do you have to put in premium? Even though gas prices are really low right now, don’t expect them to stay that way. Gas mileage is still something you need to consider. Some vehicle brands are known for having certain types of maintenance issues.
- Research current incentives and discounts on new vehicles. For some brands, the cost of new car may end up being only slightly more than the pre-owned version (especially at the end of the model year).
- Buying too old of a car may not be practical if it costs too much to fix it, unless you’re married to a gear head like me – did I mention that we finally replaced my 1994 Blazer last year?
- Compare warranties. Many pre-owned cars will still have warranties left.
- Don’t forget to factor in the cost of insurance. You have more control over your insurance costs if you pay cash for your vehicle.