May 24, 2014— -- intro: If you are trying to come up with more cash in your budget for retirement savings, a down payment for a home or a vacation fund, you have likely tried to come up with ways to reduce expenses. Yes, avoiding eating dinners out and buying coffee on the run will save you some money. But so will looking at those big-ticket items in your budget... like car payments.
For many people, car payments make up a large portion of the monthly budget. Here are some ways to be better at buying a car to help improve your budget.
quicklist: title: Consider Buying Usedtext: The smell of a new car is nice, but that alone shouldn’t be enough to make your decision (they have air fresheners with that scent after all). Some people argue it’s never a good idea to buy a new car while others like having the newest model. Ultimately it’s up to you (and your budget!) to decide which is a better choice for you. But used cars will typically cost less.
quicklist: title: Think About Your Needstext: Only you know what you will be using your car for. The salesman may push the most expensive option, and your friend may recommend a small car. But if you often use your wheels to transport a lot of people or large loads, it might make more sense to buy a bigger car.
On the other hand, if you primarily have one or two people in the car and only very rarely have to haul large objects, it may make sense to get a smaller vehicle and rent a bigger one when needed. The point is, if you’ve determined you need a car, it’s important to remember why you need it and what you can afford to spend.
quicklist: title: Negotiatetext: Even if you hate to haggle, when shopping for a car it’s expected, and priced with that in mind.
The best thing to do is to figure out what you can truly afford per month and overall before you head to the dealership. You can even go to your bank or credit union and get a loan pre-approved before you choose a car. Then negotiate on the overall price of the car and compare dealer-offered financing to the loan you know you can get elsewhere.
If you don't negotiate, you’re likely to spend more than you need to for that vehicle. When you do start to talk money with the car salesman, remember that you have to consider what the car costs overall and, if you are not paying all cash, the monthly payments.
If you negotiate only the monthly payments, you could end up paying much more for the car in the form of smaller payments over a longer time. The interest rate you pay will depend on your credit score. You can check two of your credit scores every month for free on Credit.com. You may also want to check your credit reports to make sure they're accurate, which you can do for free once a year at each of the major credit bureaus.