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5 Things To Consider Before Financing A Vehicle

By Edited Nov 13, 2013 0 0

Financing Needs To Be Taken Seriously

Hello! You're Signing Away YEARS Of Your Life!

There are many things to consider before financing a vehicle. Unfortunately, it's so easy to get caught up in the excitement that we don't always take the time to think it through. You're excited about buying a new car. You're at the dealership and some guy who is way too happy approaches you. Next thing you know you're driving an awesome new car down the highway with aforementioned happy guy next to you. And then all of the sudden you're in an office feeling pressure to sign some paperwork. Smiling guy is scribbling what looks like complex mathematical formulas on a sheet and explaining how they all work in your favor.

Stop right there. Have you ever been in that situation? Have you ever felt uncomfortable with what was happening and weren't totally sure why? I will tell you why. That dealership is full to the brim with people who are professionals at taking your money and making you feel like it's no big deal. They are armed with sales guys, business guys, warranty guys, insurance guys etc. They know how to pressure you into taking a loan for a car. There are many things to consider before financing a vehicle. Don't let the car salesman pressure you into making an uninformed decision that you will likely regret. Make sure you understand exactly what you want and need before you even go near a dealership.

Things to consider before financing a vehicle:

1. Buying a new car is not an investment

Lots of people don't like to hear this. You can tell yourself otherwise until you're blue in the face, it won't change. An investment by definition is something that has potential to earn you money in the long run. A new car can not and never will be able to do that. It is a well established fact that a new car will do nothing but depreciate for at least the first 20 to 30 years of its life.

2. The car you just bought is now worth far less than you paid for it

Congratulations, you just bought a $22,000 car for $26,000. Ask yourself if that first kilometer of driving is worth that to you because that's what it's going to cost. Used vehicles do not have the same immediate loss of value and for this reason I suggest that you check into what you can get used and compare to new.

3. How much am I going to pay for this car in TOTAL?

A car dealer makes money off you in many ways. They would be out of business tomorrow if all they were walking away with was the difference between what they pay the manufacturer and what they sell to you for. How much are you going to pay for the extra warranty? How about the undercoat, chrome package, prepaid oil change or maintenance packages, financing insurance or even the financing itself? Financing is bloody expensive and I recommend you sit down with a calculator and a friend a who is good at math and figure out how much your new car will cost you over the duration of your loan.

4. You don't have a clue where you are going to be in 5, 6 or 7 years

Of all the things to consider before financing a vehicle, this seems to get the least attention. Cars can now be financed for 7 years. I can not begin to describe to you how debilitating it can be to finance a vehicle for that long. 7 years from now is a long time, and you don't have a clue where life is going to take you between now and then. Do you want to have to say no to opportunities in life because you have to stay where you're at to service a car loan? What if you lose your job next year and can't find another? You still have that loan to deal with and trust me when I say that the finance companies are not understanding in the least when it comes to your personal hardships.

5. You could buy that car with cash in a fraction of the time if you saved instead of financing

With all the extras, sometimes people are surprised to find that they have paid enough on their car over the life of their loan to buy the car twice with cash. It may seem like it's not much money when it's a small amount leaving your bank account each month but over months and years it does add up. Do the math ahead of time and make sure you know how much you will be paying for your new toy and whether or not it's worth it to you.

It's very important to make sure you have done all your research on the things to consider before financing a vehicle. Do the math and then decide if new car ownership is worth it to you. It's entirely possible that a used car will suit your needs just as well as a brand new one.

You may also want to read:

Why Am I Broke? - Habits That Are Keeping Your Bank Account Empty

What To Look For When Buying A Used Car

 

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