With all these car ads on TV, have you ever thought about switching to a bright, shiny new car? Follow these steps to determine whether it makes more economic sense to buy a new car than to continue repairing the current one. (see also: how much should you spend on a new car?)
Look at the cars you already own for a long time
A new car always looks attractive. But if we start focusing too much on the future of new cars, all of a sudden we start to notice every little problem that our current car might have. My former boss, Bob g., used to say, “I never want to invest in rusty things.” A car other than a classic car is not an investment. It’s an expense, and it’s expensive.
So honestly look at your current car. Does it work well? Is it reliable? Does it meet your current needs? If you answer “yes” to these questions, delay buying a new car.
Calculate new and existing total costs
Buying a new car is only part of the cost. Compare the total cost of a new car to the current vehicle and compare the cost side by side.
This includes the purchase price (plus interest) and maintenance and repair costs.
In states like Virginia, you pay a certain amount of tax each year on the value of your car’s blue book, so make sure you include these types of fees as well. You might be surprised to find that it would be wise to spend a few more years on an existing car and to eliminate all the extra money now spent on a new one.
Check your financial institutions
Just as you qualify for a prequalified mortgage, getting a prequalified car loan is a good idea. You will find the total amount of money you will be allowed to spend and the rate at which you borrow. You may find that some action may be taken next year to increase credit lines, thereby lowering interest rates and possibly increasing the amount of loans you approve. These actions may include paying off other debts, increasing your income, or eliminating any errors that may currently exist in your credit report.
4. Time your purchase
In general, October, November and December is the best time to buy cars, because the dealer provide some incentives to make way for the next year’s car, and achieve the annual sales target. In addition, shopping is best at the end of this month, when dealers need to meet certain sales quotas, so they are more likely to cut back on sales.