Sunday, May 15, 2016

What You Should Know Before Buying Your Next Car

For the average American, a car is one of the largest investments made in life, second only to a house. 

This makes the car shopping process a crucially important one where you must put significant consideration into every decision that you make. 

Are you getting ready to shop for a new or used car? Here are some things you should know before you begin the car shopping process.

You should spend a max of 20% of your income on cars each month.

When it comes to determining what you and your family can afford, 20% is a good maximum to aim for when it comes to budgeting for the cars in your household. 

Keep in mind that this number includes not only car payments but also operating costs such as gasoline and car insurance. Do some calculations for how much you expect to pay for gas each month, and give your auto insurance company a call to assess what your new insurance rates will be. 

If the car you’ve had your eye on will put you over 20% of your household income each month, it’s probably time to consider something else.

Used and new both have their advantages.

We’ve all heard the car shopper’s mantra that a new car loses half its value the moment it leaves the dealership lot. 

This makes used cars the go-to option for many people. One important thing to consider here, however, is that this has put used cars in higher demand in recent years. As a result, prices for used cars have gone up, and car companies are offering more options now than ever before for new, affordable cars. 

With this in mind, going with a used car might not necessarily save you the bundle of money you are expecting.

A new car will also often give you the advantages of a full warranty, lower interest rates, free maintenance, roadside assistance, and a clean history. Still, you can usually get more features for less money when you go with a used car.

You’ll want to do some interest rate hunting first.

Don’t take a mailer ad advertising a low interest rate at face value; it may not be the best deal for you. 

In fact, only about 10 percent of car buyers will qualify for that zero-percent or low-interest-rate deal. Before visiting any dealerships, do some research on your own to determine the best interest rate you can get. 

You can use Bankrate's online rate search tool to look at current interest rates and visit local lenders who might be offering interest rates that are 1 or 2 percent lower. Don’t rule out the financial advantage that might come with taking a cash rebate, either; an online car rebate vs. low-interest calculator can help you determine which one is the better deal for you. 

It’s typically better to set up your own financing rather than set it up with the dealership because dealerships tend to offer marked up interest rates to increase profit.

You can negotiate price.

Cars are one thing that you can negotiate a price on, as wiggle room is usually built into the price. 

Do some research ahead of time on the car that you want, finding out the invoice price (what the dealership paid the manufacturer for the car) if it’s a new car and getting the warehouse price if it’s a used car. 

This will help you determine what the dealership paid for the car, and then you can negotiate using a lower price that still allows the dealership to make a few hundred dollars on the deal.

You may be eligible for discounts.

Once you’ve settled on a price that’s closer to the invoice or warehouse price than the MSRP, you can inquire about any discounts you may be eligible for. 

You might be eligible for a discount, for example, if you are a student, a member of the military, a member of a particular credit union, or even if you simply received a coupon in the mail.

Auto services do not void warranties.

When you purchased your last car, you may have been given a long list of things that would void your car’s warranty; and one of those things may have been having third-party auto work done on your car. 

But according to this article, no car dealer can actually enforce this particular item. In fact, the article states that the Magnuson Moss Warranty Act of 1975 prohibits third party repairs and aftermarket parts from voiding a warranty. In other words, it is illegal for any car dealer to deny a warranty because of third party auto repairs or having aftermarket parts installed on your vehicle. 

There is one exception, however; if an aftermarket part installed on your vehicle is not in compliance with emissions regulations, then that may void your warranty since it is in conflict with the Clean Air Act.

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