Buying a Car
Before you consider buying a car using a car finance company there are some things you should do first:
Check Your Credit
The difference a good credit score makes to your monthly car loan repayment can be very significant. So with this in mind it is imperative that before you consider buying a car using a car finance company that you check out your credit score.
By getting your credit report you can see the items that are bringing your score down and in some cases these items can be very easily fixed or even removed completely from your credit history. Having bad or negative items repaired or removed from your credit report can vastly improve your credit score thereby ensuring that you get a favourable interest rate on any car loan which you use when buying a car which in turn will mean that you get a much lower monthly car loan payments.
There may be items on your credit history that are there erroneously and can be removed merely by writing a claim letter to the credit agency asking them to remove this item.
There may be items like judgements or outstanding balances for very insubstantial amounts of cash which you could pay off with ease thereby removing the negative entry form your credit history and again ensuring that you get a favourable car loan interest rate.
Personal Finances
Most people go to school for years and are bombarded with so much useful yet useless information . It is really surprising how many seemingly competent adults have absolutely no comprehension of the basis of finance. When you are buying a car you really need to put your financial apples in a row
There are two aspects to finance which hold for every business and for every individual. They are assets and liabilities.
Assets are anything that increases your financial worth. Assets include things like your savings, your job, tools that help you generate money, rental property with a positive cash flow.
Liabilities which are anything which decreases your financial worth. Liabilities include debts like credit card balances, car payments, mortgage payments.
Sometimes what appears to be an asset is actually a liability. The home that you and your family lives in on which you make a monthly mortgage payment is a liability. True in the long term it may transfer over into the asset column but while it is taking from your monthly earnings to service its debt repayment it is a liability.
A car which is financed is a liability with the exception of a vehicle used to produce income like a taxi or work van or truck . In some instance a personal car can be deemed an asset if it is vital to getting to and home from your place of employment. In all other instances a car is a liability. When you are buying a car you should consider this.
If you need a car to date your girlfriend or go for weekends away in the country then you are making monthly payments for a vehicle that is producing no return but is only a drain on your finances.
Personal Finance Examination.
Before you set out on your buying a car quest it is important that you examine your personal finances to ensure that the beautiful shinny dream car doesn’t turn into a nightmare in a very short period of time.
- How secure is your job.
- Are you depending on overtime or a bonus to make the payments.
- Are there any upcoming financial burdens in your future like a wedding, large tax payment or school payment.
Do the Numbers:
(A) Total up all your present monthly commitments, this should include all present debt service and other regular monthly expenses like eating out and socializing.
(B) Total up all your present dependable income sources (leave out anything that you cannot guarantee)
Subtract (B) from (A) and the balance is the maximum you can afford to consider for a monthly car expenses. Keep in mind that your car expenses should include but not be limited to:
- Monthly car loan payment.
- Insurance divided by 12
- Taxes divided by 12.
- Estimated monthly running costs.
- An amount set by for repairs in the case of a used car.
Owning a car can be as rewarding and exciting as buying a car if you take the time to ensure that you buy the right car for your financial position.
