5 tips when buying
Know what you can
afford.
The first and most important question to answer
before launching into the car-buying process is
“how much can I afford?” Figuring this out will help
you determine whether you are in the market for a
new or used vehicle. A good starting point is to use
15-18 percent of your take-home pay as a gauge
for your total vehicle budget including the loan,
insurance, gas and maintenance.
Next decision, how will you pay for it? There are
numerous ways to manage the financial burden for
purchasing a new car, including taking out a loan.
If you have decided to go the loan route, determine
how much you can afford in monthly payments.
Banks or another financial institution might offer
lower interest rates than a car dealer. Aim to pay off
the loan within three to five years.
“Get pre-approved for an auto loan amount
and interest rate so you know where you stand
before you begin shopping,” says Renée Horne,
vice president of Consumer Lending at USAA Bank.
“Look for low loan rates and flexible terms to fit
your budget needs versus being steered by dealers
into a decision solely based on monthly payment,
which often results in paying more in interest for
the overall loan term.”
Another idea is to sell or trade in your new
graduate’s current vehicle. If you plan to do this,
factor in the cash value of that car and then add
your planned down payment, typically 15-20
percent. You can use online tools such as USAA’s
Auto Loan Calculator to get an estimate of what the
end price tag will be.
a car for a teen
Determine the total
cost of ownership.
It is important to understand the total cost of
ownership before surprising your graduate with
the car of their dreams. Everything from gas to auto
insurance will be an extra expense added on to the
monthly cost for a new or used car and something
everyone in the family needs to consider.
When receiving an auto insurance quote,
note that collision and comprehensive coverage
generally cost less for used cars. If purchasing an
older car, consider getting pricing for Extended
Vehicle Protection coverage before you go to the
dealer.
Keep an open mind.
Once you have established what you can
afford and the total cost of ownership, it is time to
discover what features and styles you or your teen
want in a car. Prioritize a list of the features you
would like to see. For the teen in your life, safety is
usually at the top. Next, assess how much they will
be using this car and what for. Are they commuting
to school or a job? Remember to keep an open
mind and be flexible - stay open to two or three
models that would meet your teen driver’s needs
and your or their budget.
Do your research.
Everyone can agree that dealerships can be
overwhelming and intimidating. Research your
market first. Try the USAA Car Buying Service to
see what’s out there and find vehicles that come
with exclusive member discounts.
If you are looking into the used car market,
always run a background check. You can get a
vehicle history report from Carfax, which can help
verify ownership history, mileage and accident
history. Also, make sure the used vehicle has
never been salvaged by entering the vehicle
identification number into the National Insurance
Crime Bureau’s system.
Go for a test drive.
After picking out a few of your top favorites,
it is time to see how the car operates on the real
road. Hit the highway to properly gauge a car’s
performance, and inspect the car for mileage,
tread, etc. If possible, run the car by a trusted
mechanic for an under-the-hood inspection
to forecast longevity and maintenance needs.
Remember, factory warranties usually transfer
depending on the mileage.
With graduation season and
summer break upon us,
many parents may be on the
hunt for a new car for their
graduate.
“USAA helps members
find, finance and insure vehicles that are right
for their personal needs and financial goals,”
says Heather Pollard, vice president of Auto
Experience at USAA. “We want to avoid you
ever having to regret your purchase decision,
or worse, lead to financial hardships where
you can no longer afford to keep your vehicle.”
If you are one of the millions of Americans
looking to buy a car, here are the five things
you need to know before you step foot on a
dealer’s lot.
Courtesy BPT