If you’re planning to purchase a car, you might actually be driving for a long time before you get out of debt. With interest rates rising and vehicles becoming pricier throughout the years, your new car can come with larger loans and longer terms. This can put you in debt for a long time, much more than one may be able to take.
For instance, did you know that the average loan for a new car in December 2018 was $32,000, compared to the $26,000 back in 2010? Now, the interest paid on auto loans is a whopping $5,555, up from 2010’s $2,852! Furthermore, the typical terms for auto loans are now typically 68 months, up from the 61 months in 2010.
So, financing a car is more expensive today, and interest rates are set to increase over time. Fortunately, there are ways you can reduce your car debt when investing in a car. Read on to learn about the strategies you can follow to cut off debt.
Buying a Car Without Going Over Your Head in Debt
There are many options to choose from when finding ways to finance your car payment, from a chattel mortgage Australia down to the typical bank loan. These have variable interest rates that can have your savings take a dip, so to avoid spending more than you should, consider these smart tips:
- Consider Getting a Used Car
We all probably know this by know: Used cars are less expensive than new ones. As a result, loans for used cars are usually smaller.
And no, not everyone needs a new car! Many don’t understand the reliability used cars actually have, and without the huge expensive prices.
Look at it this way: The typical monthly auto loan payments for new cars is about $558, compared to $413 for used vehicles. Besides this, while the average age of cars on the road is about 12 years old, the prices can halve after only three years! That’s why used cars are a good option if you’re on a budget since new cars would depreciate quicker and you lose the value of your payments in time.
But of course, before you do purchase a used car, you have to consider your options and conduct deep research. Make sure to look into the var’s history using its vehicle identification number. This will show you vital information about its history with title information, any insurance issues, and whatnot.
Besides this, make sure that you have the car inspected to make sure nothing was missed on the vehicle’s record, and that everything works as advertised. It should perform excellently to avoid any issues and extra costs in the long run.
- Prepare Beforehand Before Going to the Dealership
Before you select a car to purchase, you have to make sure that you are already pre-approved for an auto loan from your bank or credit union. This will put you in a better bargaining position, forcing the dealership to decrease its rate.
Also, I recommend that you do your research and shop around in other dealerships, so you know you’re getting the best deal and price on certain car models. You can search in your local dealerships, or online, where you can find a complete database of used and new cars, along with its prices.
Never be sucked into deals that offer low monthly payments. Instead, you’d want to choose to make slightly higher payments with shorter loan terms, which can save you a lot on the overall price.
Adding to this, resist the add-ons many dealerships push, as they are usually unnecessary. This includes extended warranties, additional insurance, among other freebies that you don’t need or can get for cheaper prices when sold from other stores. You might end up spending more than you can just from these “add-ons” alone.
- Watch Out for Deals
You’ll be surprised by the many car-buying incentives today that can save you a lot of money. You can find loans with 0% interest or cash-back deals, among other offers. While some offers may require better credit scores, it doesn’t hurt to apply for them to see if you are eligible for it.
Check out your local dealerships to see if they are offering deals and promos, some may also include free add-ons during certain seasons. It may also be best to time when you’ll purchase the car, as they tend to be cheaper during off-peak seasons. Ask around and do your research to make sure you’re getting the best deal or promo.
Wrapping It Up
When investing in a car you need, you don’t need to go over your head in debt. There are many ways to stay out of debt and still enjoy the perks of owning a vehicle. As long as you invest wisely and make the right purchasing decisions, you can still save and ensure that you can continue to afford paying for the monthly fees without the extravagant interest rates.
Hopefully, these smart tips on investing in a car helped you out! Now that you’re familiar with what you can do to save, try following any of these strategies and make sure that you don’t go over in your debt.
Do you have any questions or want to share your tips and experiences on saving up when getting a car? Share it in the comments section below, all your thoughts are much appreciated.