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TroveStreet® Wisdom

TroveStreet® Wisdom: Looking to buy or lease a vehicle

Second to your home, your automobile is one of your most important budget items. When shopping for a car, there are pros and cons to buying new, buying used, or leasing. Here are some things to keep in mind through the process:

  • As a general guideline, total car expenses should not exceed 20% of your take-home income. Typically, gas, auto insurance, and repairs fall within 5-10% of expenses. Car payments fall within an additional 10-15%. 
  • Shop around for financing and get pre-approved before going to the dealership. This gives you negotiating power. Credit unions and insurance companies often have the best rates on car loans.
  • When you are at the car dealership, keep it simple: focus on the car’s purchase price first. Don’t tell the dealer you plan to trade in a vehicle or finance through the dealership while negotiating a price.
  • How often do you use your vehicle?  New cars average over $45,000. If you only drive about 5,000 miles a year, you are paying a high dollar-per-mile rate. A used car might be a better option based on the cost and frequency of use.
  • Explore all options.  Because of rising car prices and interest rates, you may be able to lease a new vehicle for less per month than it would cost to buy a used or new vehicle and, in the end, have less maintenance costs.  

Buy your car at the end of a financial quarter

If you want to get a good deal on a car, the best time to buy is usually at the end of March, June, September and December. Why? Because most car dealers are given specific sales targets to reach so that they can claim their financial bonuses. While these targets are set weekly and monthly, the big bonuses are given out quarterly. This means that you’re more likely to be given a better deal on a car at the end of each financial quarter as the car dealer will be keen to hit their quarterly sales target.

Remember, knowledge is power when it comes to negotiating car prices.  When you have an understanding of local inventory dynamics, car price trends, incentives, and the negotiable aspects of a car deal, you’re better prepared to drive away proud of your deal.

Note, on average, people outlive their ability to safely drive by 8-10 years.  Plan now to continue accessing the places you need and desire to go.  

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