Top 5 Questions to Ask Yourself Before Buying a New Car

Top 5 Questions to Ask Yourself Before Buying a New Car

Your car is an expensive purchase and also an important investment in your life. Although owning a car is exciting, when you are burdened with payments, the joy of owning a car vanishes in thin air. To ensure you are making the right decision, ask yourself these questions before buying a new car.

1. Have you checked the terms and conditions of the loan and other loan details?

The most important step you need to do is check the terms and conditions of the loan. What is the repayment period? What is the monthly installment? These are two important factors that will help you determine whether you can afford the new car. Earlier, the loan tenure was limited to 36 months but later the loan tenure got extended to 60 months or more which also reduces the monthly installments and makes the car affordable to many.

You need to understand that a long repayment tenure is not good in the long run as the value of the car depreciates faster and at a certain point of time, the value of the car would be less than what you owe to the lender. This means selling the car and exiting the loan is not an economically feasible option.

2. Have you researched the interest rates on car loans?

Don’t go for the car loan just looking at the monthly payment. You need to look at the interest rates offered. The interest rates on a car loan change with the lender and depend on many factors like your credit score and the repayment period. Don’t forget to check your credit score before approaching any lender. If you have a good credit standing, you can ask the lender to reduce the interest rate.

3. What is the true ownership cost of the car?

The cost of the car is only one part of the total ownership costs of the car. You need to also consider costs like operating expenses, gas mileage, annual excise taxes, insurance costs and other ownership costs. You should not finalize the decision to buy a new car until you have researched the true ownership costs.

4. Is any other dealer or manufacturer offering any rebates or lower interests?

Rebate and lower interests are two different things. Some car dealership offers a few thousand in rebates on the purchase of a new car and people jump for the offer. Many people completely ignore other monetary factors like interest rates that might be on the higher side. Don’t get lured by the upfront savings. You need to buy the car from a dealership that offers lower interests rates.

5. What is the trade-in value of your old car?

Many people trade-in their old car when buying a new car. Some car dealerships offer a higher trade-in amount for your old car but also raise the cost price of the new car. To protect your financial interests, keep the trade-in value of the old car and the cost price of the new car as two separate things. After finding the current value of the old car, you can decide whether it is good to go for a trade-in offer or sell the old car in the open market.