Increased electricity costs, fuel hikes, knock on effects to our grocery bills… our cost of living seems to continuously increase. We’re all needing to budget more carefully than ever before. If you are needing to buy a new vehicle in this tough economic climate, what should you consider?
A car is a big financial commitment so one needs to put a huge amount of thought into it before making the purchase. It’s important to understand what exactly is involved in buying a car.
- The first thing to consider is your budget
It is not advisable to spend more than 20% of your gross monthly income on a car repayment. Remember that there will also be additional cost involved:
- on-the-road-costs (registration and licencing)
- how much you’re likely to spend on fuel given the distances you travel (use vehicles’ claimed consumption figures to calculate)
- insurance premiums
- maintenance costs (such as services and tyres) and estimate any unforeseen costs that you might incur
Write all of these costs down, get accurate quotes and work out a realistic budget.
- Should you buy new or used?
Now that you have your budget in mind, you can decide whether a new or used car will be your best option. There are pros and cons to both so you need to do your homework first. With a new car you will get the maximum extent of the warranty and service/maintenance plan cover. However, new car prices can be prohibitively expensive for some. If you buy a used car, you are likely to make a substantial saving, however a used car purchase requires a prospective buyer to carefully check and consider the vehicle’s condition, including ownership and after-sales histories, plus you may need to budget to bear maintenance and servicing costs sooner. An alternative option is to consider a demo model – dealerships like Imperial Auto often have demo models available at a much more affordable rate than a new model and you get a lot of the bells and whistles throw in.
- Avoid unnecessary costs
We would all like to have the added extras, and everything that opens and closes… but the most important requirement of your car is that it drives. Don’t be tempted to add expensive sound systems, sunroofs, electric this and that’s. Keep to the basics and keep your costs down.
- Financing your car
Buying our cars with cash would be first prize, but the reality is that many of us cannot afford it, so we have to finance our vehicle purchases. Make sure that you shop around. Try to choose a short-term repayment plan with the lowest interest rate possible. Be wary of balloon payments, as they can make repayments seem small, but could leave you still owing a large amount on your car by the end of your contract. Try to make as big a deposit as you can (ideally anything from 10% to 20% of the purchase price), as this will help lower your instalments.
There is a lot to consider when buying a car, but the most important tip of all is to do your research!