Before you hit up the local car lots in pursuit of cars for sale, there are a few things that you need to make sure that you have figured out. Here are three things to keep in mind before making a significant purc
1. Create a Cash Budget
The first thing you need to do is create a cash spending budget. Do you want to purchase the car with cash? If so, set a budget for home much cash you are willing to spend on the vehicle.
If you have some cash that you can use as a down payment, figure out exactly how much you can put down as a deposit. Your deposit amount may directly impact how much you can borrow.
Many banks will require you to put down a percentage of the loan. For example, they may ask you to put down 10% of the loan upfront.
Keep in mind that you are also going to have to pay to register your vehicle and transfer the title as well, so be sure to save some cash for those tasks.
2. Create a Loan Budget
Second, you need to determine how much you are willing to take out if you want to get a loan. Think about how much you are willing to pay back over time and how large the car payments will be.
There are a few different ways to approach a loan budget. You could determine what amount you are willing to pay per month, regardless of the length of the loan. Or you could determine both an amount you are willing to pay per month, as well as the length of term that you are willing to agree to, say 58 months or 65 months.
The important thing is to figure out how much you are willing to pay toward a new vehicle.
3. Figure Out What You Need
Third, figure out why you need a new vehicle and what you need the vehicle to do. For example, do you need a commuter vehicle? Then you need to purchase a vehicle that gets great freeway miles and will last for thousands of miles. Do you need to cart around your kids and their sports equipment? You need a vehicle that will provide you with enough seats and lots of cargo space.
Think about why you need another vehicle and what you want to do with the vehicle. This will help you be more focused when you hit the car lots and start searching for your next vehicle.