For many people, a car is the second largest purchase they make, the most expensive is usually the home. We offer the following tips for shopping for a car:
Get Your Records Straight - One of the first steps in financing a car is to get a grip on your credit rating. Unless you intend to pay cash, you will have no secrets from the car dealership, finance company or auto insurer. A poor credit history can result in a higher interest rate or even loan disqualification. Also, bad marks on your credit could flag you as an insurance risk, translating into higher premiums.
There are numerous resources available to help understand and manage car financing. The more knowledge you have about your credit, you can determine if your loan will be approved, and at what interest rate, and also catch any glitches that could be making your credit history look worse than it is. Contact the major credit reporting agencies to obtain your credit report and take steps to clean up what is necessary.
Cut Your Premiums Down to Size - Before you buy a car, find out what it will cost to insure it. Get car insurance quotes and calculate your insurance needs on the internet. Each state has different requirements when it comes to auto insurance, and we'll leave it up to you to learn what your state requires. But every state has some sort of financial responsibility law that says you need to take care of any accidents you might have.
To Buy Or Lease, That Is The Question - When you lease, your paying to use a car. Your payments cover the cost of the vehicle's depreciation while you drive it, rather than it's purchase price. If driving a new car is more important to your lifestyle than owning one, leasing is definitely for you. However, if you put a lot of miles on a car every year, it may end up being smarter for you to buy. Consider your personal expectations and financial situation when reviewing the pros and cons of each.
Buying Offers:
A chance to trade in that old clunker
Ownership and equity in the car
Control of your wheels. If you want to add eight speakers or take out the backseat, go ahead, your buying it.
No penalties if you don't hold up your end of the maintenance agreement, although you will want to service your car to enhance both it's service to you and your ability to sell it in the future.
No Mileage Limits
Payments base on the value of the car, not it's depreciation. That might mean higher monthly payments that a lease.
Leasing Offers:
A cost-effective alternative to buying a car every few years
An affordable way to drive a car that you may not be able to afford to buy. Monthly lease payments are generally less than financing payments.
A maintenance contract that requires that you keep your car in good shape and not make any alterations to it.
A factory warranty that almost always covers the car for your entire lease, so major maintenance isn't your financial responsibility.
Annual mileage limits (about 12,000 to 15,000) with significant penalties if you put more miles on it than the lease stipulates. Usually a flat charge and a charge per each mile over the limits.
Payments that may be income tax deductible if you're leasing the car for business - Ask a Tax Advisor for Details.
Penalties if you terminate the lease earlier than agreed - changes may vary.
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