Buying a Car practicalmoneyskills.com

What Can You Afford?

Budget Transportation should never be more than 15% of your net income. Gas Car Payment Repairs Etc. Insurance Registration

The Down Payment Commitment money This lets the dealer know that you mean business. About 10% of the cost of the car A bigger down payment means smaller monthly payments and less interest.

Needs vs. Wants What will you use this car for? Where do you live?

Evaluate Your Credit

Your Credit Score Lenders will tell you that you can afford more than you can. Arrange financing before

Upside Down In a Loan A car depreciates 18% when you drive it off the lot. When you get home you owe more than your car is worth.

What does that mean? A brand new Honda Civic costs $19,875. When you get home the value of your car is $15,900. You lost $3,900 buying new.

Avoid Negative Equity Keep car until it is completely paid off. Don’t buy a car that is too expensive. Don’t drag out payments. Make the biggest down payment you can.

Used Car “The Millionaire Next Door” buys cars used and drives them to the ground. Get the Kelly Bluebook value Get a Vehicle History Report (VHR) $10 to $15

Leasing? Leasing is like long-term renting of your car. You pay for it when it is brand new, and you don’t build equity. In my opinion it is a very bad idea.

Auto Insurance Price is based on Gender Age Marital Status Men get in more accidents than women. Why? It doesn’t matter to the insurance companies Age Under 25 are a higher risk for accidents Marital Status Personal Driving Record Where you live Higher insurance if you live in the city

Auto Insurance cont. Vehicle Use Type of Vehicle Size of Deductible. People who use the car more, pay more Type of Vehicle Bigger heavier cars tend to be safer. Expensive cars are costlier to repair. Sport cars are more of a risk that other cars. Size of Deductible. Bigger is Better. Type and level of coverage.

Types of Insurance General Liability Collision Required by law This insures the damage that you may cause to someone else car. Collision Insures your car if you cause an accident Required if you lease or have a loan on a car.

Types of Insurance Comprehensive Full Coverage means all three Covers everything else (e.g. fire and theft) Required if you lease or have a loan. Full Coverage means all three

Down the Road Just remember, just because you own a car, doesn’t mean it won’t still cost you. Maintenance Repair Oil changes Tune-ups Winterizing Tires Washes