Well, you can buy
a new one for around $23,000, or you might be able to buy a
clean 2003 with 60,000 miles on it for $8,000 - $10,000 or an
average condition 1995 with 150,000 miles on it for $3,000 -
$5,000. Those choices might result in a monthly payment of
$450-$550 for the new car (depending on amount, interest rate
and term), $200 to $300 for the 2003, or $120 to $150 on the
older car again depending on the interest rate, amount and term.
When you are
considering affordability, you also need to consider the cost of
insurance, state law requires liability insurance, and your
lender will likely require collision and comprehensive coverage.
This could add $50 - $150 per month in expense, depending on the
car, your driving record, and even your credit record.
How do you
determine if the car is a good value? Checking out values on the
internet is a good place to start. You can get prices and
reviews on new and used cars at several web sites two of which
are www.edmunds.com and
www.nada.com.
Many times, your
best bet is to contact your financial institution. They can
assist you with the valuation, and many times provide you with a
pre-approval so that you know how much you can afford (and can
get).
How do you qualify
for a loan? Contact your financial institution and request to
make an application. You will be asked questions about where you
live, work, how much you make and what you are thinking of
doing. Your financial institution will advise if they can or
cannot meet your request. Sometimes the financial will make you
a counter offer for the loan. In most cases when buying and
financing a car, you will need a down payment. The amount of the
down payment can vary depending on the cost of the car and your
credit. Also, plan on paying for sales tax, title registration,
and license plates (if you do not have any to transfer). This
can add 5.5% for your tax, and another $100 or so for the other
fees.
People with
limited credit are often asked for a cosigner as well as a
10-20% down payment, so speaking to a parent or relative in
advance of financing a car purchase to see if they will support
you is a good idea. People with poor credit may be asked for a
cosigner, but just as frequently they will be asked for a strong
down payment, often as much as 25-35%.
You can find a
vehicle in the paper, on the internet, shopping at dealerships
or sometimes just by driving around. Where ever you find the car
you want to buy make sure you have a good idea of what the value
should be. Again, you can get these values off the internet.
Generally there are three values; trade value or wholesale (the
low value), private party value (the amount you expect to pay
from a non dealer seller), or retail, the amount that a dealer
will try to sell it for.
When buying your
car be prepared to negotiate and to walk away! There are always
more cars out there, and you’ve got to look out for your
interests, the seller is looking out for theirs. When working
with a dealership, be prepared to say “no”. Dealers will want to
conclude the sale immediately, and may offer items that you may
not need such as rust proofing, you need to be able to say no
and to negotiate. Another good idea is to have a trusted
mechanic inspect the car before you buy it. This may cost
$25-$50 but can save you a disaster if the car is mechanically
unsound.
A final word, save
up some money. See if you can afford to set aside $200-$300 per
month before you buy the car. That way you can have a down
payment saved up, and you’ll know that you can afford a monthly
payment. Make sure that you pay on time, to build your credit.
Try not to over buy, what looks like your dream car can become a
burden if it takes up too much of your monthly income, you can
always trade up, it’s hard to trade down. Finally see your
credit union with questions about the process, they can help you
all along the way.
