How do you pay for a new car and what do I need to know? A very common question and if your bank account doesn’t have enough cash, then chances are you’ll need to obtain an online car loan. From here you’ll need to ask yourself several key questions about what type of vehicle you’re after. Here are 3 important things to consider when shopping for a new car:
Should you get a car loan?
Before you start shopping for a new car, first ask yourself if you really need one. If the answer is yes, consider whether a loan is necessary. There are multiple benefits of buying a car on finance if you plan to keep the vehicle for more than 3 years. The reason is that a loan will allow you to take advantage of the opportunity cost, which is earning interest on your money instead of paying it when financing your new car purchase. However, unlike a mortgage on a house, taking up a car loan doesn’t offer any tax incentives – you’ll have to pay tax on the loan amount.
Paying for your new car with cash is also beneficial as you won’t be paying any interest –but it’s not always possible. In some cases, a loan will be necessary to get hold of an attractive model or if you need a large vehicle that is worth more than $30,000.
Do I buy new?
There are pros and cons to owning a new car. One of the biggest advantages to buying new over secondhand is the warranty. This covers not only mechanical parts but also most electronic components of the vehicle. Although a warranty is great because it provides you with extra peace of mind, it also means that there will be more maintenance costs in the long term.
The biggest downside to buying new is depreciation. That’s right, your car ends up losing value as soon as you drive it off the lot. But contrary to popular belief, the difference in value between a new and secondhand car isn’t as big as you think. Depending on the vehicle, it averages out at about 15% for the first year. After five years that number is less than 8%.
There is one main reason you might want to consider buying a new car: safety. The latest models come with the most recent safety features, including pre-tensioning seat belts and other types of airbags that are able to protect both the driver and passengers from injury in an accident. This becomes even more important if you are buying a car for your teenager.
The other reason to buy new is that the vehicle is covered under warranty. If there’s an issue with one of the parts or electronic components, it will be fixed for free and you won’t have to worry about any extra costs in terms of repair.
Should I buy second-hand?
Research the make and model. Before going to an auto dealer or private seller, do some research online about things that could potentially go wrong. Knowing that an issue exists will help you avoid a costly repair in the future. Check for car recalls. Before buying any used vehicle, make sure it doesn’t have any outstanding recalls. This can be done online or by calling the manufacturer’s customer service department. How many kilometres does it have? The average cost of a new car is $33,131. The average cost of a used vehicle is $14,866. A big difference, especially after you account for the higher costs associated with repairing an older vehicle. Even if you are only looking at cars under 5 years old, it’s still important to consider how many km it has on them.
It is important to consider if you should get a car loan, buy new or secondhand and more before buying your next vehicle.