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Plan carefully when buying a car in tight financial times - October 11, 2008
Assess your true needs, arrange financing first and stick with dealers you know you can trust
The big water cooler issue at dealerships these days is not about the latest car styles and accessories, but about the worsening financial crisis in the US.
Canadians are understandably concerned about this issue and are wondering what affect it might have on their jobs, investments, pensions and the economy in general.
I wish I had reassuring news about this developing situation, but I don’t. To be honest, I don’t even think the financial whizzes know, with any degree of certainty, how this crisis is going to unfold.
Being an optimist, I’m confident that US politicians and lawmakers will find a workable solution to their problems and restore confidence back into the markets. I’m also hopeful that the impact to the Canadian economy will be minimal.
In the meantime, however, new car dealerships are still operating as usual, and consumers are still buying and servicing cars. Today, given these uncertain economic times, I’d like to offer some practical advice to anyone who is in the market for a new car.
In a healthy economy, people can get away with making bad financial decisions. But in an uncertain economy – as we’re experiencing now – bad decisions can have ruinous consequences on individuals and households.
The best advice I can offer car buyers in times of uncertainty is to make prudent decisions. If it’s been your style to rush out and buy a car with little or no preparation, then find a better strategy.
If you’re intent on buying the car you want, as opposed to the car you need, that’s not a sensible approach to car ownership.
Consider these points before buying a new car.
- Be truthful about your automotive needs. Do you really need a new vehicle right now? What’s the upside and downside to keeping your present vehicle for another year or two?
- Establish a firm budget and stick to it. Getting this wrong can put a severe strain on your monthly expenses – especially if the economy slows even more.
- Make sure that your credit history is accurate. Bad credit history can result in paying higher interest rates on car loans (or being denied altogether).
- Buy insurance wisely. Don’t pay for coverage that you don’t need. Plus, consider insurance that covers you for possible job loss or critical illness.
- Arrange financing before visiting a dealership. Contact several banks (including your own) and financial institutions to get the best lending rate. Don’t overlook manufacturers’ finance rates as well, which can be competitive.
- Choose the right dealership. A successful dealership is friendly, courteous, professional, and it has your best interests at heart. If these ingredients are missing, then shop elsewhere.
- Study the market. For instance, dealers often like to clear out their previous, model year inventory during the fall, and plenty of great dealers can be found. Also, you’ll probably get a better deal on an overstocked model than on a popular model.
- Determine maintenance costs. Some vehicles are more expensive to drive and maintain than others.
- Should I buy new or used? There are advantages and disadvantages to each, and buyers need to be aware of them.
- Don’t be afraid to seek help. Good advice can prevent bad mistakes.
- If you’re buying a used vehicle, buy it from a registered new car dealership. Here there is a level of protection that is simply not available from private sellers.
- Buy with confidence. If you’ve done your homework and select a vehicle that suits your style and budget, then proceed with the deal.
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