Buy A New Car Or Not
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Prices fluctuate at dealerships because dealers own the vehicles before they're sold. Buyers who might normally expect a certain amount off the MSRP, or manufacturer's suggested retail price, are actually finding higher-than-list prices in some cases.
Your loan payment should not exceed 10 percent of your monthly take-home pay, while total car expenses (including loan payment, insurance, gas, repairs, etc.) should not exceed 20 percent. Keeping these rules in mind can help you find a car you can afford for the long-run.
Buying a car is a major purchase; it is also usually a complex transaction involving a contract, financing, and a warranty. You will want to think carefully about each of these aspects of your decision. You will also want to be aware of some specific protections are available to you under the law.
First you must choose between buying a new car and buying a used car. A new car may cost more but will come with a longer warranty and no history of abuse or neglect. However, new cars depreciate (lose value) almost immediately when they leave the new car lot, which means that if you can find a well-cared-for used car, it might be a good bargain.
Consider the price of the car. This sounds obvious, but car dealers, new or used, may tempt you with a low monthly payment. You should be sure to look at the total price of the car, including interest.
Don't just assume you will finance through the dealer. Sometimes, you can get better financing from your bank or credit union. You should also check your credit score before you go shopping as this can affect the terms such as the interest rate you are offered. By shopping around, you may be able to negotiate a better deal. Note that Texas law sets maximum interest rates for financing used cars. The rates vary according to the age of the car and the amount owed on it.
DO NOT leave with your new car before the contract has been finalized completely and signed by both parties. This is especially true if you are financing through the dealer and/or leaving a trade-in vehicle behind.
It has been known to happen: the consumer leaves the old car as a trade-in and drives away in the new car with only a verbal agreement about the amount of the monthly payment. The contract just needs final approval - \"a mere formality\" - by a manager who is not immediately available.
What happens The buyer's credit is not approved, the monthly payment will be significantly higher and the trade-in has already been sold. The buyer is stuck with the new car at the higher payment or no car at all.
Get all promises about service and guarantees in writing in the contract and in the final copy of the buyer's guide. If you were promised something but it is not in writing, do not sign. If the seller offers a warranty, it must be in writing for it to be valid.
All used car dealers are required by federal law to tell buyers whether a used car is being sold with or without a warranty. Dealers must clearly display this information on a side window of each used car. This buyer's guide, or window form, should state either:
The buyer's guide becomes part of the contract at the time of the sale, and any guarantees listed on it override any restrictions in the contract. If the sale is in Spanish, the buyer's guide must be in Spanish. If you don't see the buyer's guide in the car window, ask to see it before you agree to buy a car.
The law prohibits rolling back or changing the number of miles on an odometer. Texas law requires the seller of any used vehicle to state on the title assignment the total number of miles the vehicle has traveled. Make sure you get a copy of the odometer statement when you sign the contract.
The financier might also require you to have collision insurance to cover the balance owed on the car. If it is required and you do not have it, the financier can repossess your car. Before agreeing to allow the financier or the dealer to obtain insurance for you, shop around. Generally speaking, you will pay less for insurance you purchase yourself than you would for insurance purchased by your financier or arranged by the dealer. Understand all your insurance responsibilities before you sign.
Under Texas Law, you do not have 3 days to cancel the purchase like you may with some transactions the dealer is required to register and title the vehicle in your name within 30 days, regardless of if you owe money on the vehicle to the dealer or another financier. As soon as the vehicle is registered in your name, the dealer should provide you with the original title application receipt from the Tax Assessor-Collector's office.
Keep all payment receipts and other documents in a safe place. Do not keep them in the glove compartment. If the car is stolen, or if a dishonest dealer illegally repossesses the car, you will have no records of ownership or payment.
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In general, used cars are cheaper than new cars. But both have increased dramatically in price over the last few years. New car payments have jumped from a monthly average of $554 in 2019 to $667 in 2022, an 18.5% difference. Used cars also saw a drastic jump from $391 on average to $515, a 27.4% difference.
Monthly payments are based on the average interest rates for new and used vehicles as of Q1 2022 and a 60-month term. Maintenance and repair costs for the first year of ownership are according to Edmunds.
If you do decide that purchasing new is the right choice for you, plan and look out for seasonal deals. Timing your car purchase carefully and shopping around for auto loans can reduce some upfront expenses.
Deciding between a new or used vehicle will come down to factors including financial considerations and your tastes and needs. Consider these issues when choosing which type of purchase is right for you.
Multiple costs are often cheaper when you buy a used vehicle rather than a new one. Everything from the price of car insurance to dealer fees will be less expensive when you buy a used vehicle. Depending on the vehicle you choose, the purchase price will also typically be less for a used car.
A slightly older may have higher maintenance costs, which is an important consideration if you have a limited household budget. Much of the maintenance associated with a new car will likely be under warranty.
You should also take the time to test-drive multiple vehicles and shop around with a few sellers, getting quotes from several auto loan lenders. Ensure that you get the lowest monthly payment and most competitive financing terms to keep more of your hard-earned money in your pocket.
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