When you are setting up your budget for a new car purchase, don’t sell yourself short. Far too many look at the monthly loan payment amount and don’t consider the bigger picture. The following are some of the biggest mistakes to avoid when you are looking to find room in your budget for that new car purchase.
1. Overlooking Insurance Costs
One of the biggest mistakes people make when they are setting a budget for a new car is failing to take into account insurance rates. New car insurance rates are higher than rates for older models.
If you find that you will not be able to swing the loan payment and the insurance cost of your new wheels, do a bit of shopping around for insurance rates. You will be surprised at the differences between auto insurance providers.
2. Ignoring the Maintenance and Repairs Costs
Another common mistake in setting a new car budget is regarding maintenance and repairs. Maintenance is essential to keep your new vehicle in top shape. Also, you will begin to need repairs a few years into your auto loan. Will you have the budget then for making a monthly loan payment and paying for repairs?
3. Forgetting to Budget for Fuel and Its Costs
If you are looking at either an all-electric, hybrid, or gasoline model vehicle, you cannot guarantee prices to fuel your new ride will remain constant. Does your budget have enough elasticity to weather the inevitable bumps in gasoline and/or electricity costs?
4. Miscalculating the Monthly Payment
It is really convenient to click on the dealer’s website and see the estimated monthly payments for your ride-to-be. There is no guarantee that the figure you see will be your monthly loan payment for the vehicle. You may have some flexibility if you have good credit. If not, your loan payment might be far higher due to higher interest costs.
5. Failing to Attempt Loan Pre-Qualification
Are you a new driver with no credit history? It is a good idea to plan ahead and take out a credit card that you faithfully pay off every month to develop a good credit score. Otherwise, you could be in the same boat as those with bad credit and have higher interest payments.
6. Not Considering a Down Payment Amount
A great method for new car buyers to lower their monthly auto loan payment is to come in with a higher down payment. This technique will also lower the total costs for financing the loan over its life span. That is a win-win situation, but it may mean waiting on your new vehicle purchase and saving more cash.
7. Missing Out on Incentive Pricing and Loan Rate Deals
If you have looked into every one of these ideas and still don’t know how you will afford that new car, you can look on the dealer’s website regularly for their incentive pricing and loan rate deals. Incentive pricing means the vehicle will be discounted for a certain amount of time. You can save even more by finding a loan rate deal. Manufacturers offer incredible automobile loan rates for qualified buyers at certain times of the year. These loan rates can hover near or around zero percent. That will definitely lower your new car loan payment cost.
Budgeting for a new car needs to be a slow and methodical process. Ensure you are budgeting for today’s insurance, repair, maintenance, and fuel costs as well as for a few years down the road. Also, search for the very best auto loan rate and be willing to save up for a higher down payment as needed.