Buying a car is exciting. If you’re ready to shop, you’re probably thinking about size, gas mileage and that new car smell. But before you get too caught up in the details of your future ride, make sure you can afford it. A new car is rarely cheap, but if you make a realistic financial plan, you’ll be able to drive away happy.
Follow these three steps to afford the car you want:
1. Know what you can afford
Figure out a monthly payment that fits your budget. Is owning your dream car worth it if you have to cut corners every month? On the other hand, don’t opt for a very-old or problematic car just to save money up front; you’ll probably end up paying more in the long run. Also, when making a budget, don’t forget to include the cost of insurance, gas and maintenance.
If you’re not sure what kind of car you can afford, plug your ideal monthly payment into an online auto-buying calculator. Compare the price to a reputable retail website to see what’s available.
2. Tackle the financing
Unless you can pay for your new car in cash, you’ll need to get an auto loan. But before you apply, check your credit report. Lenders will approve your loan based on your credit worthiness, so if there’s an error on your report, you’ll want to correct it to raise your credit score and get a better rate.
Next, check out the auto loans offered by your financial institution, and settle your financing before you go to buy the car. That way, you’ll know exactly how much you can spend. But make sure you consider the total cost and terms of the loan. How much are you being charged in interest? How long will it take to pay it off?
3. Research your trade-in value
One of the best ways you can drive down the cost of your new car is with a trade-in. Even if your current car isn’t in exceptional condition, you may still be able to trim the price. Using Kelley Blue Book or other similar websites, enter information about your car. Factors like age and condition will all be assessed in determining your ride’s value. The dealer may not necessarily accept the trade, but you can also sell the car on your own at a fair price.
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