Car is a necessary thing for all of us as you can move where ever you want. Now a day the car has become a regular accessory and you find different kind of cars in a house which carries the value of more than $100000. We need a car as it saves time, is quite comfortable, reliable and over all a symbol of status and style.
But simultaneously it has to be kept in mind that this asset wipes out your bank balance quickly. Now you need to think what factors you should avoid at the time of buying a car.
1. Before buying a car you need to understand your monthly budget. Every time you need to calculate your expenditure and how much you are saving. Many a time people stretch their budget to purchase a car which is beyond their reach. Due to advertisement the car is now considered as a status symbol, but you shouldn’t have to think regarding that if you don’t need that. If you purchase more than your necessity, you have to pay more premium than your budget.
2. The difference between a used car and a new car is the warranty. Now a day you find used cars which transfer warranty and go through inspection and renovation before they get a place in the lot. In case of a new car you will get more service options like extended warranty or service contract which you won’t get from an used car. From the financial point of view an asset always depreciates and hence a car is considered as an asset. The depreciation varies from 20-40%, so before choosing a new car you can search for a used car which is in good condition.
3. From the financial point of view, house and car are both considered assets, but house is considered as a positive asset as the value increases with the time, whereas car is considered as negative one as its value depreciates or becomes lesser with time. So before spending a lot of money you require to think as you will not get back your money. For this reason you need to avoid a long term repay option as you need to pay more interest.
4. To get a car on loan you have to provide a down payment and later you pay the rest of the amount with interest. But if you don’t have any savings or have lesser amount than required, it is not at all difficult to get some loan. But you need to avoid availing that from the sales person as they can go a long way to sell a car.
5. In case of owning a car, you should have to consider the entire cost including the monthly payments. This indicates the insurance of the car, maintenance and utility bills. These factors are different from one to another as the insurance cost varies from car to car.
So, you need to avoid these five aspects before buying a car and also need to understand your financial strength.