2 of 13

Write now Article Tools

Buying a car is a major decision. With the exception of buying a house, there are very few things that you will purchase that come with that high a price tag. Unfortunately, too many people make poor decisions when going through the process. If you're willing to take the time and effort, there are some big savings to be had.

First, you need to know what you need, and how much you can realistically afford to spend. If you need a family car, then buying that sporty compact that's on sale doesn't make much sense. By the same token, if your finances are limited you probably can't afford the gas to operate a big SUV. You know your financial situation better than anybody else. Just because the salesman uses a financial ratio that says you can afford a bigger car does not mean you have to spend that much.

You will need to do a little research on the different cars you are interested in. There's a lot of information available on the safety and reliable of different cars, so take advantage of it. you can also check on which cars hold their value better, so when it does come time to trade your car in, it will have kept more of it's value.

One bit of wisdom: Never buy a new car! Unless you are a collector of classics, cars are a horrible investment, and new cars are the worst. Cars are a tool for you to use. They won't go up in value. The difference in value between a new and a used car is thousands of dollars. When you purchase a new car, the instant you drive it off the lot, it is a used car. You immediately lose 25% - 30% of the value. By purchasing a used vehicle, you allow someone else to suffer that initial loss.

The ideal situation would be to have enough time time to plan, set up a savings account, and be able to pay for the full value of the car with cash. Sadly, it seldom works out that way. You finance the vehicle, pay fees and interest, and in the long run pay much more for the car.

If you don't have the money available, but you need to buy a car, you can do it in a way that will put you a better position for future purchases. The key is to buy the least expensive car that will meet your needs. It may not have a fancy cd /mp3 player, but your buying a car, not a music system. It may not be flashy, but if it's reliable and meets your needs, get it.

Because you bought a less expensive car, your monthly payments will be lower than you budgeted for. Take the extra car money and 1) pay off the loan early, and 2) put money into savings toward the purchase of your next car. Don't rush out at the next opportunity to buy your next car. Drive this one for as long as you can, or until you have saved enough to pay for your next car.

With the money you save in payments, you will be able to save for a nicer car, and you will be earning interest instead of paying interest. All in all, I'd say that's a good deal.

Learn more about this author, Jim Smoot.
Click here to send this author comments or questions.

Add your voice

Know something about How to save money on your next car?
We want to hear your view. Write now!