Things I wish I Learned in School: Buying a Car

So it is finally time for you to buy your first car. You have been saving up for a while and you finally have enough to make the big purchase. Now that the time is here, questions start popping in your head. Do I pay cash or do I need a loan? What is the interest rate? Do I buy or lease? How can I avoid getting ripped off? If you are in this position and have these questions, then hopefully this article will give you some good insight on how to buy a car.

The first thing that needs to be done is decide how much money you actually need for the car purchase. If you are like most people, you will probably need a loan of some sort. This is an important piece of information to know because this affects what kind of vehicle can be bought. If you plan to buy a car with cash, then there is no limit to what kind of vehicle can be bought (as long as you have the money). If you will need a loan however, there are many factors that will come into play on what you can get.

One of the biggest factors is your credit score. If you have a good credit score, it is possible to get 0-2% interest on a car loan for 5 years or longer. If you have a low credit score, the interest rate could be as much as 9% or even higher. This can significantly drive up your monthly payment. Another factor is how much money down will be required for the car loan. Usually, the more money put down on the car, the lower the interest rate will be. Along with putting a large down payment, another way to get a better deal is if you have a co signer for your loan. If a parent or grandparent with strong credit co signs with you, it will help your credit score, therefore dropping the interest rate. So if you are planning on getting a car loan, be sure to do some research on what kind of interest rates are out there and how much money will be required in order to get the lowest rate possible.

As for buying or leasing, this is something that can cause quite a bit of debate among people. Leasing a car is generally more expensive initially, however monthly payments are typically lower. This causes people to think that leasing a car will be less expensive over the long run. However if you take in account what happens at the end of the lease, it can go either way which makes this choice very subjective. The basic break down of how each works goes like this. When buying a car, you typically trade in your old vehicle and any equity is applied to the overall cost of the new car. That means if you bought a $30,000 car and traded in a $4,000 car you would only be paying the difference on the new car so your payment would go down because there is no interest rate on the difference. When leasing a car, you typically start out by putting a down payment as well as the first month's worth of payments. Some people choose to put more down on a leased car in order to pay less each month, but this is not required to avoid paying interest. The big thing about leasing a car is that you never own the car and when the lease is up it is time to trade in for a new car. This can be a good or bad thing depending on who you ask about it. Many people lease a car because they want to always have the latest and greatest car. On the other hand, if you are someone who wants to keep a car a long time, this may not be for you.

So what does all this mean for you? It means that whether you pay cash or finance your new vehicle it is important to do some research. If you are getting a loan for your purchase then it is important to be aware of what kind of interest rates are out there and how much money will be required. If you are leasing, find out what kind of down payment is required for the kind of car you want . If you are paying cash, figure out how much car you can get for the money that is available. These are all important things to take into account when purchasing a new vehicle.

Now that you know what kind of vehicle can be purchased and the difference between buying and leasing, it is time to start looking. One of the most important things to do when thinking about buying a car is to know your budget and stay within it. If you can afford monthly payments for a new car, then by all means go out and get the car you want. However if you are like most people and can't afford a high monthly payment, then it is important to look for used cars that can be purchased with cash when you find one that you like.

And whatever you do, don't let a salesperson pressure you into something. Sometimes it can be easy to fall for their tricks so stay firm on what you want and need out of a car. If you are stuck between two vehicles then ask the salesperson what the difference is in price and go from there. At the end of the day, it is your decision so make sure you are happy with it before signing on any dotted lines.

Then once you make your decision, sign some papers and enjoy your new car.