Your car plays a big role in your family vacations, epic road trips, and daily life. In a way, your vehicle serves as a symbol of your current chapter of life. So buying the right car is a big choice, whether you're going through a major lifestyle change or you just want an upgrade. But before you start shopping for a new vehicle, it's important to do some research and planning first.
It's hard to resist that new car smell, but you'll love your new ride even more if you take these six important steps first. Why? Because knowing that you stayed within your budget and made a smart purchase will make every ride in your new car even sweeter.
Check Your Credit
Your credit score plays a big role in your auto loan rate. The higher your score, the lower your rate could be; which means big savings for you. Check out your credit score before you start shopping for a new vehicle. If your score isn't quite where you want it to be, look over your free annual copy of your credit report to see if there are errors or areas for improvement.
Have a Down Payment
It's a good idea to put some money down on your car to build equity. The more you put down, the bigger your chunk of ownership in the vehicle. A large down payment could also reduce your monthly loan payment because you won't have to borrow as much.
There's no set amount for what you should put as a down payment on a vehicle, but the general rule of thumb is to shoot for ten to twenty percent of the purchase price¹. If you plan to put less than that (or even nothing) down, you might want to purchase GAP insurance. GAP could protect you from a potential financial loss if your vehicle is stolen or in an accident. This insurance will fill in the 'gap' between what you owe and what your insurance company pays out.
Get Pre-Approved
In the excitement to start shopping, many first-time car buyers skip this step (or don't even know about it). Getting pre-approved for an auto loan could give you more negotiating power. This step shows the dealership or private seller that you're serious about buying and you have the financing to prove it.
Another nice perk of getting pre-approved is that it can help you stay on budget. If you're pre-approved for $20,000, it's easier to stay away from the $60,000 luxury SUV because you already know that it's not in the budget.
Remember the Extras
Taxes, title fees, and registration fees can easily add a few hundred dollars to the final purchase price of your vehicle. Don't forget about the added cost of buying new or transferring old license plates. Budget the extra costs of buying a car before you start shopping to get a more realistic idea of your final purchase price.
Do Your Research
Figure out what you want in a car before you go shopping so you're not overwhelmed by choices when you get to the dealership. Have a few styles picked out and decide what features are deal breakers on your list of needs. Then read reviews and talk to others who own the type of car you're considering to gain a better understanding of what to expect.
As a Lake Trust member, did you know that you can even shop from home with our new online car shopping tool2? Search inventory at local dealers and compare vehicles in one easy spot.
Maintenance and Insurance
Besides the purchase price, don't forget about the additional costs of owning a car after you drive off the lot. Get a few auto insurance quotes on makes and models of cars that you're considering. Also, research the average maintenance costs of each perspective vehicle. Luxury cars may cost more to maintain than vehicles with standard features.
Your car plays a big role in your walk, or drive, through life. Doing a little work up front can help you make a smart purchase that you can enjoy for years. But no matter what you decide in the end, we know that you'll make the right choice.