New car models these days have more tech gizmos and better safety features than those from a decade ago. They also look good, to be honest. And let’s face it: it’s enticing to trade in a beat-up clunker for grimy seats.
Countless Americans make big mistakes when buying new cars. For instance, take a new car purchase with a trade-in. According to Bloomberg, as many as a third of buyers roll over a debt of $5,820 on average from their previous car into their new loan. That means they are essentially paying for something they don’t use anymore.
Ouch! That hurts and is no smart way to buy a car. Don’t worry; here is a winning strategy to buy a car without getting into unnecessary debt.
Before setting foot on a dealer’s lot, ensure you get preapproved for a car loan from your credit union, bank, or online lender first. That’s because getting a loan before a lender outside the car dealership prompts you to think about the most critical question. “How much can you afford to spend on a car?”
You want to have an exact figure you can afford before that car salesperson gets you all excited and falls in love with those leather seats and sunroof on the latest limited model. Moreover, getting preapproved from an outside lender helps reveal problems with your credit report. You can decide to build your credit score or correct any erroneous information on the report before shopping for a car.
When buying a car at a dealership, for example, at a Volkswagen dealership Los Angeles, focus on one thing at a time. Don’t tell the salesperson too much. It’s like a game; you can’t reveal all your playing cards.
So, how do you start? The first step is to ask for the price of the car you intend to buy. Do not even mention your budget. The salesperson will often quiz you on whether you want to trade in another vehicle and whether you want to get a loan through the dealership. Politely refrain from answering these questions. The salespersons are pros at negotiating, and once you reveal all your intentions, they will find a way to get you to pay extra money.
For example, you could negotiate a reasonable price on the vehicle, but if you’ve already revealed that you want a trade-in, the salesperson will lowball you on it. To avoid this, take things slow. First, negotiate the price, and once you settle, talk about your trade-in.
According to Times Magazine, your car expenses should be no more than 20% of your monthly take-home pay. The actual car payment should be anything between 10% to 15% of your income. The rest accounts for things like insurance and registration.
If that new car you’ve fallen in love with doesn’t fit this criteria, it’s best to consider buying a pre-owned one. Luckily, finding a used car that is still in excellent condition is easy. The USA has an endless flow of cars coming off three-year leases that are reliable and in good shape.
You can walk to a pre owned certified Volkswagen dealership, get a car with about a hundred thousand miles, and drive it for another hundred thousand. You don’t have to commit to a car loan that spends almost all your monthly income for five years. It’s unsustainable and will break you.