Quick Guide: Ensuring You’re Getting A Good Deal On Your Car!

Before you start!  5 Questions To Ask Yourself Before Buying A New Car

Resisting the allure of a new car is difficult, especially if you've just had to spend a mint repairing your existing vehicle. It's easy to convince yourself you need to make this massive purchase, but a lot of us need to be able to talk ourselves out of it. Are you toying with buying a new car? Ask yourself these questions to ensure you're making the right choice:

Am I purchasing this car to save money or to save myself the hassle?

As your car ages, it can require a lot more maintenance than before, but keeping your vehicle in good shape is often a lot cheaper over time than purchasing a brand new car. Have you calculated the payments? Will you really save money? Or are you just hoping to save yourself some headache? If it's the latter, consider reassessing your desire to purchase this new car.

Can I afford the monthly payments with room for sudden income or expense changes?

As we've mentioned on the Dime Turner, nearly half of all Canadians are just $200 away from not being able to meet their monthly obligations. If payments on your new car each month brings you close to this range, trouble may be in your future. Going ahead with this car purchase could mean that just one small change in your income or expenses would lead to disaster. Ensure you have enough coming in each month to cover your other financial obligations, your car payments and still have cash left over, acting as a buffer between you and budgetary meltdown.

Do I need a longer loan term to be able to afford the payments on this car?

The problem with this strategy is that if you stretch your loan term too long, your car payments will continue well into the age of your vehicle, and now regular maintenance is going to be more costly. Now, you're doubling up your automotive expenses each month because while you still have to pay down your loan, you also have to get significant work done on the vehicle. It may sound more affordable now, but in 6 or 7 years, you're looking at a big money crunch that you might not be able to afford.

Will the payments eat up my ability to save money?

Part of a sound budget is the ability to save money for the future. Whether you're putting money aside for an emergency fund, saving to make a big purchase or saving for retirement, tucking cash away must be an integral part of your budget if you want to live with any financial security. If your new car payments eliminate or significantly obstruct your ability to save, it's probably not the best idea.

Do you need a new car or do you want a new car?

9 times out of 10, people who are being honest with themselves are going to answer that they want the car. Who can blame them? That new car smell, the latest features, everything is so clean and functional. However, wanting a car and needing one are two very different things. Acting on your desires when money is involved can get you into trouble. Instead, plan to purchase a car in the future and then save up for it. You can start with a secured savings loan. Click here for information.

Let's face it, the novelty of a new car wears off fast, and you'll be stuck with the payments. It's always better to be patient than to make an impulsive decision that could impact your financial future.

5 Ways To Ensure You’re Getting A Good Deal On Your Car

So you’ve decided to go for it with a new car! Or at least one that's new to you. Buying a used vehicle can be a stressful process and you don’t want to get ripped off buying a lemon. How does an average person make a smart decision when it comes to buying a vehicle? Here are 5 ways to ensure you’re getting a good deal on your car.

1. Talk to the seller

You can uncover a lot through casual conversation. Ask questions about the condition of the vehicle and make sure that you give it a test drive before making any commitments.

2. Research the year, make and model

Different model years have their own unique quirks and problems. An easy way to know what you’re getting yourself into is to do a quick google search of the vehicle you’re considering. Even researching what type of gas mileage you can expect is never a bad idea either.

3. Get the vehicle inspected

I know this step can be a hassle, but it’s worth it to get a trusted mechanic to give the car a once-over. An inspection can cost around a hundred bucks, but can easily save you thousands in potential repair costs.

4. Conduct your own VIN search

A VIN search will let you know the history of the vehicle, if there are any liens on the vehicle or if it was stolen. You can plug your VIN in here for a free search to see if your potential vehicle is stolen or lost and you can check for more detailed information on Carproof.com or Carfax.com

5. Always negotiate

Regardless of whether it's a private sale, or you're buying from a dealership, negotiating is not only okay but expected. Prices tend to reflect the possibility of negotiations, and the seller will likely expect an offer less than the list price. Protect your wallet and negotiate aggressively.

Advice for those thinking of getting a car loan with bad credit.

You’ve probably seen the ads on television or popping up in your social media feed promising great car loans for people with bad credit.  These are high-risk loans offered to people who have poor credit and they sound too good to be true. That’s because they often are. To offset the risk of lending to people with poor credit, you will likely need a large down payment and you’re going to face astronomical lending rates as well. There are many better options than dealing with bad credit car dealers.

It is far better to wait until you’ve got better credit before you finance an automobile. Having better credit opens up many more possibilities, including better interest rates and a higher chance of approval. Looking to get approved for a car loan? Here are 5 steps you need to consider.

1. Check your credit first.

It’s far better to know you have bad credit beforehand. You then have the opportunity to improve it and there will be no surprises when you go through the application process. Clean up poor credit to avoid the awful interest rates. Check your credit score for free!

2. Skim your loan payment agreement

Know the differences between 3,4,5,6 year loan terms. While a longer term will enable you to have lower monthly payments, there isn’t much benefit to a longer term other than that. The longer your terms are, the longer you’re going to be stuck with a monthly payment. The more time it takes to pay down your loan, the more interest you will pay, as well. Make sure you understand the other terms of your agreement as well and skim the fine print. Make sure your rates don’t skyrocket after a certain period of time and calculate what the loan is going to cost you. In the end, you could be paying far more than you’re comfortable with for the automobile you’ve chosen.

3. Get pre-approval

When you get yourself pre-approved for a car loan from the provider you’ve chosen, you have more negotiating power with a dealership. You’re also going to be offered much better interest rates. Pre-approval for a car loan makes it pretty clear what your budget ought to be when shopping for an automobile.

4. Choose the right car

Your pre-approval is going to dictate what you cannot exceed as far as budget goes, but should you choose a new or used car?

The traditional thinking here is that buying a used car that has low mileage and is only a couple of years old is going to be your best bet. You avoid the first couple of years of severe depreciation, your insurance will cost less, and you still get the benefit of a relatively new car, avoiding excessive repair costs.

But wait, remember just a couple of months ago when we told you about the incentives for buying a new zero-emission or low-emission car? To take advantage of these hefty incentives, you have to buy new. In some cases, you get as much as $12,000 back if you trade in your old clunker for a zero-emission vehicle. This shaves quite a large amount off the total price you’re going to pay for a car over its entire life, even with the depreciation taken into account. What’s more, you’re going to save a whole pile of cash on gas.

The downside, of course, to buying new even with all of these incentives, is that you’re likely going to have to finance the vehicle. This means you’ll need a good enough credit score, or a cosigner to be able to take advantage of the incentives for buying a zero-emission vehicle. You’re also going to be paying interest on your purchase which offsets the incentives slightly.

If you live in a province with incentives for buying lower or zero-emission cars, your best option is, by far, to buy the new car with a smaller carbon footprint. There are far too many financial benefits to ignore. If you are unable to finance a new car due to poor credit, there is always the option to be patient while you work on your credit score.

5. Get approval and make regular loan payments

This is going to be a great credit booster, too!

You have to make sure you can afford to buy a new car if that's what you decide to do, as once you put the rebates you get back onto your car loan, you’re still going to have monthly payments to fit into your budget until the car is paid off. If you can’t afford the monthly payments, then your best bet is just to buy a used car outright. Consider getting started with a credit building program to boost your budget for a used car, while you work on building your credit. That way, you’ll be able to purchase a “newer” used car that doesn’t have a ton of miles and won’t cost you a mint just to keep running.

Learn more about Refresh Financial's Credit Building Program!