Buying a car: the five most important steps

Buying a car can be very stressful. A wrong decision can have far-reaching negative consequences that affect people’s lives. Therefore, buyers should consider all options before signing a contract. Below is an explanation of some of the most important steps a car buyer should consider.

Step 1: make a decision on the type of car

A decision on the type of car is an obvious starting point that should be driven by your “needs” as a car buyer rather than your “wants.” If you let ‘wants’ drive needs, this can lead to a costly mistake. If you are a car buyer and you want to understand your needs, these mainly evolve around:

1. Engine – the most dominant factors in this are the type of fuel (diesel engines are more efficient than gasoline engines) and the size of the engine (which determines speed and acceleration power);

2. Transmission: There is one of three options, manual, automatic or semi-automatic, with automatic being an option for those who like to avoid changing gears because they spend a lot of time behind the wheel. Automatic vehicles are generally less fuel efficient than manual vehicles;

3. Vehicle size: What will be the average number of passengers seated in the vehicle for most trips? Is additional space required?

4. Probable use: how often and how far will the car be driven each week? If you are a business, then you will most likely quickly generate many miles on longer trips. However, if it is a family car that is required for school tours and grocery shopping, there will likely be a lot of short trips. For cars on long trips, the size of the engine and the type of transmission become important to optimize efficiency.

Step 2: What is your monthly budget?

If you are not buying a car with cash and are looking to use car financing (installment purchase, car lease or car loan), once you have made a decision that limits the type of car, the next critical decision is to decide your budget. for monthly car payments. A general rule of thumb is that your total monthly payment should not exceed 20% of your take-home pay (that is, your take-home pay) per month.

Step 3: How Should You Finance Your New Car?

The four most common ways to finance a new car are by paying cash, buying in installments, getting a loan from a finance company, or leasing the car. These four different financing options can be classified into two main auto financing groups:

1. Those with whom you finally acquire ownership of the car (paying in cash, car loan or rent-to-own; with the rental purchase you do not own the car until final payment); Y,

2. Those with whom you do not own the car unless you choose to buy it at the end of the financing period: car leasing. There are mainly two types of car leasing: (a) An operating lease (also known as a contract rental), you do not actually own the car, you only pay a monthly fee to keep it for a period that usually ranges from two to five years ; and, (b) Lease / Purchase (also known as a purchase contract), you pay a monthly fee to keep the car, but you have the option to buy the car at the end of your contract (for a price agreed upon at the time of the firm). the original contract).

So the decision that needs to be made is whether or not you want to own the car. To do this, you need to consider the benefits of car leasing versus car buying. There is a lot written about this and a great debate about which one is better. However, there is no correct answer and it depends on the circumstances of the car buyer. However, the benefits of each are:

Benefits of car leasing vs. buying cars:

1. Companies avoid at least 50% of the cost of VAT (if they use contracting by contract);

2. No large advance deposit;

3. You get a more prestigious vehicle for less money (sometimes up to 60% less);

4. Update your car every 2 to 4 years;

5. Avoid the stress of buying and selling when the new vehicle is delivered and the leasing company picks up the old one.

Benefits of buying a car:

1. There are no contractual restrictions such as fines for excess mileage or wanting to change a car sooner than expected;

2. If interest rates are low and the vehicle depreciates quickly (some cars depreciate by as much as 40% in the first 12 months), it would be better to buy the car.

Step 4: What are your preferred car ownership costs?

It is wise to consider the costs of owning a vehicle throughout its useful life. For example, there could be two cars you are looking at and one is cheaper to buy than the other. However, the cheapest because it could actually cost you a lot more for the entire period you have it instead of the one that is more expensive up front. The costs to consider are the annual road tax, fuel and maintenance costs, insurance, and depreciation (depreciation is not an issue with car leasing)

Step 5: How to Find the Best Car Prices

By now, you should have a short list of at least your top 3 vehicle options, with your # 1 option being the most profitable. However, now you want to know how to find the best price for your preferred vehicle. The quickest way to determine the cheapest price for your new car (whether you are buying or renting) is to use the internet. There are many different types of car websites that compare the cost of cars and the cost of their financing. You should spend some time looking at them and in doing so find out which is the cheapest and what is the average price.

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