Your shiny new car is closer than you think.
Do you want to buy a car? There are some goals you’ll want to first achieve, such as building up your credit score, saving for a down payment and researching the perfect car for your life. And when you’re prepared, getting a new car can be an easy and stress-free experience (yes, we know you didn’t think that is possible).
What You Need to Do Before you Buy a Car (or Lease One)
Yes, you need to prepare. The last thing you want is a car commitment that has you spending more than you can afford or being committed to four years of payments on the wrong car. Here’s how to get in shape for your new dream car.
Get Your Credit in Shape
Your credit can determine how much you can borrow and what your interest rate will be– a huge contributor to your monthly payment. You can check your credit score for free with Credit Karma or you can go direct to the credit rating bureaus Equifax, Experian and TransUnion to you learn your score. If it’s not perfect, there are ways to improve it such as paying down your outstanding debts, closing accounts you don’t need like department store cards and consolidating credit card debt under a lower-interest loan. Keep your credit card balances low and pay them on time, and pay your phone and other utilities on time. Make sure that there are no false reports on your credit reports, and if there are, report them immediately and ask for them to be removed. You’ll improve your reliability as a credit risk and decrease your debt to income ratio.
Know What You Want
Do your research on cars that fit your life. Do you need seating for a lot of people? All wheel drive? Room for the dog? The ability to reach the baby in the second row from the driver’s seat? Look for reviews of vehicles from cars to SUVs to minivans or trucks from women just like you (hint, hint – you can find those here!). We know that finding your dream car isn’t as easy as picking the style and color.
Then, there is a whole lot more to consider, including the cost of insurance, which can add hundreds to your monthly cost, fuel, parking and maintenance. As a potential car buyer or lessee, need to assess all your needs. Plus, you’ll want to test drive the vehicles you’re interested in.
Buy or Lease?
This is probably one of the biggest questions people have. The answer starts with you and your long term goals: Do your long term saving and spending goals include a car payment? Or are you in the camp of ‘no car payment is financial nirvana’? If you’d like to get a car payment off your list of financial obligations, buying a car is the answer. If you can take advantage of tax benefits or a leas is the only payment that fits your budget right now, that may be the answer. Either way, be sure to look at the fine print to make sure that it’s the right way to go.
Develop a Savings Plan
Now that you know what you can afford and have done your research on the car you want to lease or buy, it’s time to develop a savings plan.
Use your spending history to determine how much money you have available for all your car expenses– monthly payments, gas insurance, and of course, a downpayment or lease deposit. If you currently have a car payment, you should use this to determine whether or not the payment for your future vehicle is within your means. If it isn’t you will want a car with a lower monthly payment and/or maintenance and fuel costs.
For me, I’ve found that it is easier to meet a savings goal when I don’t see or “feel” the money coming out of my accounts. Using automatic savings plans helps. Also, committing to savings challenges, like saving all $5 bills that come into your possession helps too.
And Now the Painful Part: Doing It
To maximize your savings, if you’re a normal human being, you’ll have to take a thoughtful and deliberate approach to spending and saving. Some things you can do include:
- Eat out less
- Shop less, and buy only what you truly need
- Sell gently used clothing or other items
- Make coffee at home
- Reduce expensive activities like going to the movies or concerts
- Evaluate your monthly bills for savings; do you really need Hulu premium AND cable?
Armed with these goals and tips, you will be well on your way to getting your new car!