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December 4, 2019 - Financial Considerations When Buying a Car

December 4, 2019 - Financial Considerations When Buying a Car

December 04, 2019
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Time to buy a car? Short of buying a house, this is one of the most important purchases you will make. It's also one that you might be making several times throughout your life, comprising of thousands - sometimes tens of thousands - of dollars.
If you think about it, you can probably imagine other things that you might want to prioritize, including saving for retirement, buying a home, or even some lifestyle purchases, like travel. Not to mention, having more money in an emergency fund may be handy if you have an unexpected expense. Thankfully, there are many choices for saving money by avoiding spending too much on your next car. Here are some things to think about.

Buying a new car? Buying one that's used might require more research and test driving, but under the right circumstances, it can be a better value.

A trade-in might not always favor you. A dealership is one choice to consider when trading in a car. Another option is to try and sell your vehicle, yourself, directly to another person. If you do attempt a trade-in, however, avoid any major expenditures on the old car beforehand. Focus on getting the best price for the new car and leave the trade-in for the end of your negotiation.

Leasing vs. buying. If you like to have a new car every few years, leasing is an approach to consider. Leasing a car is like renting an apartment. You pay a monthly fee to use the car for a specific amount of time, usually two to three years. Monthly payments are typically lower than when you finance, since you are paying for the depreciation on the car while you drive it. In certain situations, lease payments may also have tax considerations. However, there are caveats to leasing. For one, a lease typically stipulates the number of miles you are permitted to drive during the course of the lease. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.

Shop around for interest rates, but consider credit unions. Credit unions tend to have more-favorable rates, as they are member owned. At the average American bank, the interest rates are 4.93%, according to Bankrate.com. Meanwhile, you can often get rates around 3.37% through the typical credit union. There are several other benefits to credit unions, including being based locally. There are many financing options, though, so make credit unions only part of your research.[1]

An automobile is a big-ticket purchase. It's worth taking your time to make sure you've covered your bases in terms of making the most responsible purchase.