Purchasing a Vehicle

Purchasing a Vehicle Purchasing a Vehicle

One of the largest purchases in our lives besides purchasing a home, is purchasing a vehicle. Throughout large parts of the United States, a vehicle is a necessity. There are right and wrong ways to approach and finalize a vehicle purchase, unfortunately, many mistakes are often made. The most frequent mistakes involve financing of a vehicle. I want to give you some very basic guidelines to purchasing a vehicle.

The first issue is, if you are borrowing money to purchase the vehicle, you are borrowing money on a depreciating asset. If you must absolutely borrow money to purchase, make sure you have a down payment or cash equivalency of your trade at a minimum of 25%. Finance the vehicle for as few years as possible. If you cannot budget the vehicle payments for a term of 36 months or less, that vehicle is out of your price range. A dangerous trend I am witnessing is people borrowing money for terms of 72 months with little to no cash down. That situation has a high probability of failure for many reasons. Unless you drive very little, the car will depreciate faster than you can pay the vehicle off. If you needed to trade the vehicle within the next 5 years, you are going to be upside down on the value to amount owed.

Do not succumb to high pressure tactics at a dealership that may put your budget and credit at risk. You can walk away from a deal that smells bad. There is nothing worse than allowing the purchase of a car to strain your finances and make you feel as a slave to monthly payments.

 

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