Frugal is the new black isn’t it? These days, everyone is looking for ways to stretch their dollars further. In fact, it’s so popular, it’s sexy! The problem is that everyone seems to talk about the simple stuff. You know, clipping coupons, choosing credit cards, and making sure you budget properly. But what about the big stuff? What about major purchases, like choosing your next car? Is it possible to be frugal in the process? Absolutely! Today, we’ll talk about how to be frugal when choosing your next car!
New Or Used?
There are so many people out there that have to keep up with the Jones’. This is a very expensive trend that pushes them to buy newer things. However, is a new car really necessary, or can you go used. Think about the thousands of dollars that you lose when driving your new car off of the lot. Is that really worth it?
To me, the answer is no! In fact, I have owned 4 vehicles in my lifetime. When buying these cars, I went to reputable dealerships and asked for low mileage, used vehicles. In doing so, I purchased 3 cars and a truck that were between 1 and 3 years old. Saving an average of around $2,300 per vehicle purchase in instant depreciation, I’ve saved nearly $10,000 by deciding that I didn’t need a “Brand New Car”!
Cash Or Loan
If you have enough money sitting around to purchase your car cash, you may be thinking about which may be better, purchasing with cash or taking out a loan. In almost 100% of the cases, cash is going to be your best option. First and foremost, when purchasing a vehicle cash, you will likely get a cash price, which is generally at least $1,000 less than the credit price.
On top of that, if you purchase your car on a loan, you will have to pay interest. The only way this makes sense is if you’re making more money on the money you have sitting around than you will pay in interest, which is rarely the case. In general, interest on auto loans will come in between 4% and 5%. This of course is if you have incredibly good credit. However, if your credit isn’t perfect, your rate can be as high as 9% or higher. With investments returns at the moment coming in well below any of these numbers on average, and interest on savings accounts even lower, chances are that your money will be better spent now!
What If You Don’t Have The Cash Laying Around
The truth is that most people simply don’t have thousands of dollars sitting around that can be used to purchase a car. However, that doesn’t mean that you can’t be frugal about getting a car loan. First and foremost, search for your own loans. Often times, dealers will earn an additional half a percent or so on the loans they bring to the table. This increases your cost. Also, all loan providers work differently. They will charge different interest rates and different fees. So, shopping around could save you hundreds or even thousands of dollars.
Pricing Your Car
If you are paying for your car in cash, you know what you can afford. However, what if you’re paying for your car with a loan? How do you know how much money you can spend on a car? The best thing that you can do is determine how much money you can comfortably afford to pay every month. Then, use a loan calculator to figure out what the total cost of a vehicle that you can afford is.
There are a few things that you’ll want to keep in mind when you go shopping…
- What You Tell The Salesman – Your salesman’s job is to sell you the most expensive car you can afford. So, when they ask how much you plan to spend, tell them about 75% of what you actually plan to spend. This way, your salesman shows you all of your options, even the ones he or she won’t make the best commissions on!
- Everything Is Negotiable – Too many people are afraid to negotiate the prices of cars. The truth is that they are almost always priced for negotiation. So, by not asking for a lower price, you’re wasting your own money! Make sure to negotiate for a better price.
- Shop Around – Never buy a car from the first lot you visit. Instead, visit at least 3 dealerships before making your decision to ensure that you’re getting the best deal!
Frugality isn’t necessarily a strategy, it’s a way of life that can be applied to just about every purchase you ever make. The one thing that you should always be thinking, is how can I save money here. Whether you’re buying a notepad, or buying a car, chances are that if you’re not asking how you can save, you’re leaving money on the table!
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