Having a car budget means that you are either thinking of buying a car or already prepared to buy one. Cars nowadays are a necessity rather than just to show off your social status in life. As such, lenders have taken notice and offer auto loans for consumers who needs to have their own car for business use or even for their family.
There are ways to equip before taking out an auto loan to make sure that you are well prepared not only in taking out the loan but in owning a vehicle as well. But this all starts in buying a car and saving up for the funds you need to get one. You also need to consider the type of car that you need based on how you plan to use it.
If you are still single, you might get away with a sedan because you are not hauling in too much people. But if it is for your family and bringing kids to and from school, you would be needing bigger vehicle like a minivan. If it is for business and you need to project a certain status to clients and employees, you might need a high-end car.
There are some who seek adventure and life outside the confines of their offices and take a 4×4 vehicle to take on the off-road. But with all these, understanding the end use of a car is just the beginning. The next logical step is to look for the car that fits the need. There are multiple car brands both local and import and each car brand has a lot more models to choose from.
What to watch out when buying a car
Time.com shares that there is a forecast that car sales will increase by about 2.4% this 2015 compared from sales in 2014. There are a lot of people who are buying cars for various reasons and if you are one of them, it would benefit you to know some of the tricks car salesman often use when you come up to the dealership looking for a car.
- Appraisal for trading in cars starts low. When you get a salary increase, you might not take notice of just how much you are coughing up for a new car even if you trade in your old one. You might be thinking that at least you are able to trade in and just add a few thousand instead of buying everything by cash. But you need to do your homework and see how much you can get from your old car. This is because some salesman will low blow you and appraise your car for a much lower value hoping you start negotiations on that amount. This gives them the upper-hand when you start asking for higher price. Before you go inside a dealership, know how much your car retails so you have an idea and can dictate the amount.
- Cross selling higher-priced items is second nature. Investopedia.com explains that cross selling is trying to sell an item that has a higher price to a customer. This is so they can get more sales for the day. It is possible that they offer low rates for nice cars but when you get to the dealership, they might say that it has already been sold and they start offering you other cars that are more expensive. When you hear about a sale on a nice car, call the dealership to confirm that the unit is still there and ask for a hold or any form of assurance that if you go on that day, the unit will still be there.
- Adding on to the bank’s rate. The way most dealers work is that they get help you secure an auto loan from a bank to help you pay for your car. And when they get back from talking to the bank, they give you a rate that is slightly higher than what was approved because they a few points to earn extra from your loan. One way to combat this is to talk to your bank beforehand and try to find out the interest rate you can be approved for based on your credit score. You also need to be aware that there are dealerships that offer what they might call in-house financing targeted for costumers who has low credit scores and cannot get a bank to approve their loan. But they charge high interest rates to cover the risk they are taking with extending you an auto loan.
- Selling unnecessary add-ons so you pay more. Once you are decided on a car, some dealerships will offer you add-ons that you really do not need. It usually comes in the form of extended warranty for the car but you need to read the fine print for all these offers. There are some that offers coverage for specific needs like the warranty is for electrical components only or for oil change needs at certain mileage.
Expenses when you own a car
After you have bought the car, you expenses will not stop. In fact, other households hold off the purchase of a car not because they save up for it but their budget cannot accommodate the monthly car expenses in their household budget that are over and above the auto loan payments. Here are some of costs that you need to factor in with buying a car.
- Gas prices at the pump. You do not have a control over what the gas price is and this will change frequently. As you have factored in cost in public transportation, you need to do the same for gas. Of course, a lot of people would point out that the amount you put into gas expense could be the same as your transportation expenses. But the thing with transportation expense is that you can just buy a bike or walk to and from the office to save on cost. But if you need to use your car, there is no way around your need for gas. One thing you can do is to pump more when the prices go down so you can save on your budget.
- Maintenance will increase. Your car needs love and care and maintenance will be a prerequisite. You need to make sure that you bring in your car for maintenance every so often so it runs smoothly. You also do not want your car stopping at the middle of nowhere at night because your did not check the water and now it has overheated. You might also find that you are having a hard time making that turn because some car fluids are running low. You need to make sure that your car is in tip top shape to keep you away from accidents. If you find that your local shop seems to be charging a high price, you can go ahead and learn how to do the basic maintenance so you can save some money.
- Insurance depends on the car. You also need to make sure that you have car insurance to give you peace of mind. This is something you might not have figured in your budget when you decided to buy a car but this is a must.
You car budget must not only include the amount that you will need to buy the car but you must also prepare for monthly expenses. Aside from the auto loan payments, you have a lot more on your plate and you need to include those in your budget.