3 Financial Factors to Consider When Buying Your First Car

Buying one’s first car is something that is special because it is all enthusiasm from that point and moving forward. With good reasons, considering the fact that having a car can provide convenience since one is now able to take the road for new exciting adventures faster and easier.  For some, it can be a symbol for luxury, its leather seats providing the best comfort and that majestic sensation.

Either way, getting a car entails some major financial implications to a person or family who is making the decision. This is why it is important for every person to consider a number of financial factors before making that big purchase.

buying your first car

Many people have already recognized that a car is more of a need than luxury. In fact, almost everyone in the United States has a car or has registered for a driver’s license, accounting for a rise from 167 million to about 214 million just in 2014. Car ownerships are continuing to rise mainly because of the benefits of having a personal or family automobile, all the more reason why everyone else should take time to list down some important things first before purchasing their own.

Here are some of the considerations one should sit down and look at before deciding to buy his or her first car:

How much is Affordable?

The rookie mistake for each person trying to get a new car is that it’s almost always certain that he will want the best line of the top tier brand. No one can blame them, as having a new car can induce a kind of excitement that is incomparable. Financially, however, the primary factor to consider for anyone about to purchase their dream vehicle at this point is his budget and how much is he willing to actually spend on it.

getting the keys

Setting up a realistic budget before any decision to purchase is compulsory to any person wanting to be financially smart. This is to project whether the purchase would bring more benefits or more financial stress in both the short term and long term future. Is that new Cadillac 2017 XT5 Crossover fit one’s budget, or is it just there only to put more financial stress? Is the 2017 Toyota Yaris of great value to a person and his family considering that it’s cheaper?

Making a decision for a new car can be both exciting and stressing at the same time.

With regard to prices, one does not only have to look for brand new cars. The point is that there are so many car lines being produced today, and as the integrations of technology add to its mechanisms, the prices are pushed to the ceiling. As a smart consumer, it isn’t necessarily good.

Cars being introduced today are not really affordable for many people, which is why buying used cars can be the answer to this hindrance. According to Experian’s most recent State of the Automotive Finance Market report, used vehicles definitely cost less – a LOT less, with an average financed amount of $18,850. That’s more than $10,000 less than the amount for a typical new auto!

bought new used car

The common misconception of buying a used car is it is not as classy and as hot compared to brand new ones. The image formed in one’s mind when looking for second hand cars is it is ragged and craggy, rusty and may be break down easily when you drive a mile up.

That’s not necessarily true.

Secondhand cars can still provide the same dreamy, classy ambience emanated from a brand new car. Buying used cars is gaining popularity over the years because beyond its apparent cheapness, they are tuned, durable and most definitely reliable. In fact, for as low as $10,000, people can find good quality Toyota used cars in the market today!

Availability of Payment Options

As one has already set the budget and has projected the amount that he needs to pay, it is now time to take into account the availability of payment options. A good payment option lessens the financial stress of a person as he or she continually pays for the car. Usually, cars are sold less when bought at a full price, but that is not the common thing for many people to do as car prices are steadily going up.

A variety of banks are actually offering car loans which actually help those who want to purchase a new car. It is a good payment option mainly because a carbuyer doesn’t have to take out a huge amount of money in the succeeding payments. This partitions the full amount to a number of payable months which is achievable for many. The important thing however is to look for banks which offer little interests or collaterals since a missed payment can cost huge losses for a payor. Reading the contract with full understanding should be mandatory.

car loan applicatioin

There are also numerous payment options for second hand vehicles. While it is true that one would typically pay a higher interest rate on a loan for a used vehicle than he will on a loan for a new vehicle, historically low rates mean that many automakers can offer attractive financing options for their Certified Pre Owned (CPO) vehicles. Certified pre-owned cars (CPO) present an attractive alternative to buying a higher-priced new car. For less money, a CPO buyer can afford a car that feels almost new, even if the odometer is showing some miles.

In addition, shopping for a CPO car is easier than shopping for a used car. This is because the certification process removes one of the major drawbacks to buying a used car: uncertainty about the mechanical condition of the vehicle. A factory-trained mechanic inspects a potential CPO car to ensure it measures up to the requirements of that manufacturer’s program. The dealership that’s performing the certification replaces or repairs anything that’s worn beyond the limits of that manufacturer’s program.

Ownership Expenditures

What most people fail to consider in buying their first car is their assessment of what is called the ownership costs. Most people think that the cost for a car is seen on based on what the salesman offers. This is a wrong notion since the purchase is just the start of the financial stress.

When buying a car, many customers determine the value that a vehicle offers by comparing the price tag versus the features and benefits. For example, if one car costs a bit more money but has better gas mileage and more cargo room, most would consider that a good value. Based solely on that criterion, they would be correct. However, most customers don’t consider all the costs that go into a vehicle.

keys on keys
It may be smart to check out Intellichoice.com, a site which does a great 5-Year Cost of Ownership projection for new and even used cars. This projection takes all of the different factors into account including costs depreciation, financing costs, repairs, maintenance, fuel, and insurance. It totals them all up over the cost of 5 years, and compares that to the industry average for that vehicle’s class. Depending on how far above or below the total number is from the average, Intellichoice places a rating on the car.      

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