When you buy a car, new or old, with a loan, it is important that you make sure that both maintaining the car as well as the new debt is well within your affordability. This will prevent you from being crushed by your car loan, if you know where the pun is.
According to research it is seen that:
- People, in fact the Americans are taking on more autodebts for higher amounts and for longer terms than ever before and
- The average number of months Americans spend in paying off their auto loans is 69.
This means that almost for more than six years, people have to meet with the pressing demand of making their car payments. This, by itself, is a difficult task given the fact that people also have several other debts to pay off, several demands to meet for a daily living and take care of their medical needs and bills as well.
Keep things within your manageable limits
In most of the times it is seen that most of the people start to fall behind their repayment schedule. They start to find ways in which they can deal with this pressing demand.
- Few even stop paying it entirely, thereby jeopardizing their financial health and credit, both severely in the process.
- There are few other sensible and responsible people who take help from professional debt counsellors to help them in such dire situations.
- Few are even smart enough to work on it on their own and look for easy and effective relief options and programs at reliable places such as Nationaldebtrelief.com and others.
However, the most sensible way to deal with your auto debt is to take care of it even before you take it out.
- You should research well about the specific loan you want to take out
- Know about its pros and cons and
- Balance it with your affordability and current income.
This will ensure that you repay your auto loan as desired and right on time and situations will never go beyond your control.
The process to follow
Ideally, when you buy your car on loan, you should work in this way:
- First, read a number of articles on the internet to find out some good cars to buy, especially those are offered on loan.
- Then, read a few more articles about how much you should pay for a car considering you current income and existing debts.
- Combine your newfound knowledge with your new financial responsibility and use it to create a proper budget so that you can find out whether or not the car is within your price range.
It is only when you are done with this initial prep process you should visit a car dealership to look at your chosen cars.
Know the sales tactics
When you visit a car dealership, you should be well aware of the sales tactics so that you do not end up buying a car that you cannot afford to keep.
- You must know that irrespective of the country, the common practice of the salespeople is to convince you to buy that thing that will help them earn more commission. This means, they will be more concerned of their benefits than your interest.
- You must also know that when you search for your car in a dealership the salespeople will be more interested to know how much you will want your monthly payment to be rather than tell you the overall price of your car. They will show as if they are concerned about your affordability but the fact is far from the truth.
Hiding the overall price of the car or even the loan, they are actually hiding the extra amount that you will pay in the end. In most of the times, this amount is found to add p to a considerable figure, which you could surely have avoided if only you were shown the right picture.
Looking deeper into it
The fact that they hide the overall price is that the total price of a car remains fairly static. This means that the car will cost you just as much as it should cost you, provided there are no chances of reducing a couple of thousand dollars on the sticker price while you make some severe haggling at the lastminute.
Therefore, making you shop on the basis of the monthly payment will help the salespeople make some very weird upsells that you will surely give into when these are opened to you. an example will make things very clear to you.
- If you wantto pay $381 per month on your car loan, which is the average monthly payment on a used car loan as of last year, and take out a 36-month loan you can buy a piece that will cost about $13,000.
- On the other hand, if you stretch your loan further 60 months you will be able to afford a car that may cost you something around the $20,000 range.
All these prices are all hypothetical and are made on the assumption that you are making a minimum down payment and are offered a comparatively low interest rate.
The way to go
Ideally,it is advisable that you take out car loan for a less as three to a maximum of five years. Both ways, you will not have to pay more.
- If you take out a car loan for lesser than three years, you will have to pay more as your monthly installments which will surely affect your budget and monthly expenses leading to hardships and even further debts. This will increase the burden on you due to your loan.
- In case you take out a car loan for more than five years on the other hand, you will surely end up paying more on your loan eventually in the form of interest. This will increase the cost of your loan.
Being already quite wide, the range between three to five years seems to be perfectly reasonable for your budget as well as the price range.