• Buying a car is a great savings goal. Get started today with Payctiv’s Goal-Based Saving¹. 
• If you’re shopping for a car now, focus on buying one you can afford. You can lower the price by buying used, shopping at the right time, and negotiating.
• A good credit score can help you get the most affordable interest rates. Using outside financing rather than relying on dealership options can also help.
• Shorter loan terms are usually more affordable over the life of your loan.

Cars have become more expensive over the years. While buying a chic vehicle is a fun goal, finding a car you can afford is more important in the current economic environment.

Here are some things to consider while you’re looking for a car and researching financing options.

Costs to Consider Before Shopping for a New Car

There’s nothing wrong with wanting a nice car, but you have to be able to afford it. 

When you can’t afford the vehicle of your dreams, you can set it as a saving goal with Payactiv’s Goal-Based Saving. However, if you need a vehicle today, there are plenty of nice cars on the market that don’t require a Lambo budget.

Make sure to consider these costs as you create your auto budget:

• Insurance: The coolest “cool” cars sometimes come with massive insurance bills. Whichever make and model you’re purchasing, get auto insurance quotes before you shop so you know what the premiums will be.
• Maintenance: New cars depreciate in value quickly, but buying a used car comes with trade-offs in terms of maintenance costs. There’s a lot of in-between, though. You can look for used vehicles with the lowest mileage you can afford to help balance the cost of your car loan with the cost of upkeep.
• Down payment: You don’t always need a down payment when financing a vehicle. Nevertheless, having one can often be the difference between qualifying for a loan or scoring a lower interest rate.
• Interest rate: Your goal is to get the lowest APR possible over the shortest term possible. Bad credit auto loans often charge predatory rates, so try to improve your credit score before you shop. 
• Gasoline: This can be a pricey line item if you drive a lot. Consequently, you need to account for it.

Don’t Appear Too Eager When You Visit the Dealership

After you’ve considered the costs, it’s time to go shopping. Even if you love a particular vehicle, avoiding coming on too strong is wise.

If the salesperson can sense that you’re attached to a certain car, it takes away some of your bargaining power during negotiations. In turn, this can end up costing you money.

Shop at the Right Time to Get the Best Deals

Salespeople at dealerships generally receive commissions, with sales periods concluding at the end of every month, quarter, and year. 

During these times, salespeople are under pressure to meet quotas. This means they might be more willing to give you a great deal than if you shopped during other times of the month or year. 

Don’t Take On a Loan You Can’t Afford

Maybe you can’t afford your dream car right now, but you’ve found one that is good enough to get you and your family around safely. If so, you need to look at your financing options. 

Ideally, you’ll shop around with different lenders before going to the dealership. Outside financing sometimes offers better rates and terms, but it’s okay to have the dealership run your numbers to see if one of their partner lenders can’t get you a better deal. Just don’t rely solely on dealership financing. 

When you’re buying a car, it’s not uncommon for salespeople to ask you what you can afford each month. Don’t fall into this trap. It’s an attempt to spread your loan out over an extended period of time to give you the illusion of a lower monthly payment. Instead, you’ll pay more overall on your loan because you’re paying interest for additional months or even years.

Even though the monthly payments will be smaller, the total vehicle cost will be more expensive. 

What to Do if You Can’t Afford Your Car Loan

Sometimes, you think you have a stable budget, but the unexpected happens. You might get laid off. Your spouse might get sick and incur sky-high hospital bills. Life happens. 

Whether you have a cool car or a soccer mom van, don’t ignore your car payment if something like this happens. There are actions you can take that are better than taking a hit on your credit report for nonpayment.

For example, lenders can usually defer up to two payments per calendar year if you’re going through financial duress. If you’ve used up those two months and you’re still struggling, refinancing might be a better option than making continued late payments.

The Final Word

The car of your dreams is a great long-term saving goal. But, when you’re buying a vehicle for the here and now, consider your long term financial goals to choose a car that’s both cool and budget-friendly.

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