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5 Options for buying a car on a budget

5 Options for buying a car on a budget

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A car is one of the most substantial investments a person can have in their lifetime. Because of the hefty costs involved, auto purchase requires due diligence. Interested car buyers must explore all options, especially when working on a specific budget.

By taking time and shopping around for the best deals, an automobile purchase can prove to be a worthwhile expenditure. An automobile provides convenience and comfort, allowing its owners to take long or short trips anywhere without depending on public transport.

Buying a car on a budget will require you to make wise decisions. Take heed of the following tips, so you're confident in making the best choice.

1. Consider your financing options

Avoid taking out a car loan to fund your vehicle purchase. However, if your budget isn't enough, explore various financing options and opt for the one with the lowest Annual Percentage Rate (APR), which represents the total costs paid annually, including fees other than the interest rate.

Talk with the bank staff to see how you can get the best deals. Be aware of your credit score to know where you stand. According to American credit information firm Equifax, a good credit score ranges from 670 to 739. Borrowers with good to high credit scores will enjoy an easy application process, including lower interest rates.

Conversely, those with less than stellar credit history may pay higher rates and longer terms. Few lending firms have specific programs for these buyers, including Bad Credit Car Loans by Naked Loans.

Some dealers may also offer in-house car loan schemes. Before signing up, read the fine print and check the APR to ensure you're not paying more than you should.

2. Trade-in your old vehicle

If you have a car and plan to buy a new one, prepare to trade it in so you'll pay less for a better model. Have the maintenance book and ownership documents ready, and hire a mechanic to ensure it's in tiptop shape. Find out its fair market value, contact cash buyers and pay for the remaining balance, ideally in cash.

3. Buy a used car

Car prices have recently soared worldwide because of the increasing demand and supply shortages due to industry disruptions. For instance, wait times for a new car in Australia have reached 146 days, according to a news article published in June.

Second-hand vehicles are experiencing the same demand surge, and dealers are scrambling to re-purchase cars they sold a few years ago.

When buying a used vehicle, ensure you exercise due diligence to pick the best deals. Visit dealerships, check online markets, and bring your best mechanic to test and evaluate the unit to prevent buyer's regret.

Otherwise, opt for certified pre-owned models, which are proven and tested to be in good condition. These models also come with a warranty as an assurance.

5 Options for buying a car on a budget

4. Consider leasing instead of buying

If you're not on the market for the latest vehicle, consider leasing a car instead of purchasing it. Lease payments are relatively affordable, especially for compact vehicles. Some shops offer renters the option to purchase the car they've been leasing, allowing them to buy the unit at lower costs than its current market price.

Before getting a lease, ensure you can pay for the monthly costs and maintenance fees to avoid hefty charges if you cut your lease short.

5. Don't hesitate to negotiate

Whether buying the car in cash or on loan, see if you can negotiate for a lower price, especially if you're buying it in cash. You can do this in car dealerships and banks where you wish to apply for a loan.

For instance, instead of a 10 per cent APR, ask whether you can reduce your total borrowing price to eight per cent. Consider reducing the terms, too. While exercising your bargaining skills, it's crucial to note that there isn't a guarantee that your efforts will bear fruit. Still, it doesn't hurt to try.

Additional tips

Besides practicing the above-mentioned tips, here are some suggestions to keep your purchase costs to a minimum.

Stick to your budget: Check online and offline resources to find a used vehicle that fits your budget. Avoid the temptation of choosing a newly-released car if you can't afford it.

Shop around: Don't jump at the first vehicle that catches your fancy. Compare the prices of three to five units before picking the best offer. Do the same when looking for a car insurance policy.

Skip the car accessories: While extras can make your vehicle unique, note that they're called 'accessories' for a reason. Your unit can still function well without a posh leather seat cover, ceramic tint, or alloy wheels. These add-ons will only increase your purchase price and put a considerable dent in your budget.

Concluding thoughts

With skyrocketing car costs, it pays to be prudent and spend according to your budget. Exercise due diligence by conducting research and comparing prices. Also, stick to a reputable manufacturer and consider the costs of ownership.

By taking heed of the tips above, you'll eliminate the risks of going overboard with your budget, allowing you to save on your purchase costs.