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Buying a car can be an extremely stressful situation. You've worried about finding a good deal making sure that you have a great car.
Today we're going to break down how you can prepare your finances to get the best deal on your next car!
What You Need to Know About Car Loans
Cars and car payments are a way of life for many couples.
According to the latest data I could find, there’s a record 2.5 million auto loans originated.
That’s certainly a big chunk of their budget going to cars.
We’re a bit different.
Once we paid off our car loan with the Jetta, we’ve bought our cars outright.
As a personal and financial decision, we choose to go debt free with cars.
And if you’re curious about how that works, then you’ll want to read our guide on buying cars with cash, which takes you through how we save up and buy our cars.
It’s helped us skip having a car payment for the past 10 years.
And personally, I feel like going debt free on cars is the best option, but every couple is different.
Maybe you have a car that’s having to have repairs and because you’ve been throwing money to keep it going you don’t have much of a down payment?
Or you’d like to go for a used car, but your spouse is hesitant and isn’t willing to go that route?
Throughout the seasons, I’ve put out the offer to you to send in your money questions. I did a call for this season as well. And guess what?
Car loans came up. A lot.
Which isn’t surprising, considering that 85% of new car purchases and 53% of used car purchases use a loan.
But if you get a car loan, is there a way to make sure it’s extremely affordable and if you decide to pay it off sooner, would the numbers work in your favor?
It’s a challenge that I want to tackle today.
By examining the numbers and pushing away the hype and ads, I think you can get a clearer picture of the real costs and then figure out what’s the best option for you.
I’m extra excited because one of you lovely listeners is the guest. And Maggie actually pitched this topic to me in person.
Yep, a Raleigh listener.
Maggie and her husband Ben are trying to figure out what their options are for buying a car. And they were kind enough to share their situation and questions.
What’s cool to me about is that David Jacobs VP of Consumer from our sponsor and partner this season, Coastal Credit Union is going to give us some insights on the lending side.
In this episode we’ll discuss:
- how to figure out how much car you really can afford
- getting the best rate on a car loan
- running the numbers to uncover some loan traps – like if those 0% deals on new cars are really a good deal
I want you two to be able to feel confident that you’re getting the best deal you can.
I hope you enjoy!
Essential Resources for Buying a Car
If you two are thinking about buying a car soon, here are some handy resources to help you get the best deal on them!
- Best Budget and Money Apps: Personal Capital, Tiller, Mint, Zeta
- Grow Your Stash Faster: High Yield Savings with CiT Bank
- AutoSmart by Coastal
- How to Raise Your Credit Scores
- Jumpstart Your Marriage and Your Money
- 5 Days to $5K Course
- Buying a Car with Cash- Crazy or Crazy Smart?
- How to Get the Best Deal on Your Next Car
- The 3 Biggest Myths About Credit Scores That Can Ruin Your Finances
Thank You to Our Sponsor Coastal!
Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today.
If you are hunting for a car loan, take a minute to review competitive rates and deals Coastal is offering now to make buying a car easier!
Best Way to buy a Car
Elle: So Maggie you and I were talking about this – and this is a kind of a situation that people are dealing with- like what to do with the cars.
And I know right now if it's correct you've paid off your car right?
Maggie: Yeah mine paid off but it's not his is not. But it's close. Is it close to being paid off.
Ben: Just a few months and the other will be paid off.
Elle: Wow congratulations on that.
Maggie: Yeah. We've been trying to double up on it just get it off as much as possible. But we'll be excited to free up the funds to try to pay off things like student loans and other [stuff].
Elle: I totally get that. So I know kind of the dilemma or the thing that you guys are talking about and discussing is what to do about your car because you mentioned that your car needs some work.
It's a little more frequent. Is that right?
Maggie: Yeah It's about..it's a Hyundai Accent. It's about nine to 10 years old. It's hit that over a hundred thousand miles in it. We've put it; recently broke down a couple of months ago and we had to replace a few things on it.
That wasn't your average maintenance but the car itself, its value isn't worth much. And then recently it broke down again and we had to put another six hundred or so into it. So it's getting to the point where we know that a new car is going to be in our future.
Elle: Gotcha. So what's the time frame you're thinking Maggie in. How about you? Like. what are you thinking Ben about the time frame of replacing this car?
Maggie: You gonna go first?
Ben: My time frame is like three to five years. I think we can make Maggie's car last. We will up to probably plan on doing some decent amount of work every year.
To me, I'm looking at the savings of not having a car payment and you know not only getting out of debt but just start saving a good chunk of change each month as well.
So I know that's an optimistic view of three to five years. I know I'm pushing it for sure. But I like the err on the side of optimism.
Maggie: Yeah for me not so much. I think being a girl in general just the thought of being stuck without a car on the side of the road with problems like it stresses me out.
I do work part-time and so for me to save some money for a down payment on a car and then have to turn around and dumped that money into repairs of an existing car.
Eventually, you got to look at it and go OK enough is enough in my opinion. So idealistically I agree that maybe two years, but I don't know about three to five years on that.
I think too that I definitely am not a person that wants to shop for a car when my car is like completely kaput.
Like, I want it still running a little bit because then I feel like I'm pressured into making a quick decision because I'm careless.
Establish Your Timeline, Start Saving Up
Elle: So you might be nodding your head because you hear this and it's very similar to the conversations you're having – where you do want to get a car replacement but you're not agreeing on some of the details.
So first off this was great that they had a timeline in mind. Yes, it is different men is looking at three to five years and Maggie's thinking one to two years based on what they're seeing with the car repairs and with what's going on.
But having a timeline allows you two to see is there an opportunity for you to start saving now even if you can't completely buy a car if you can get a down payment.
I'm not going to share Maggie and Ben's specific numbers but let's take that example of the average car payment for use car being $381.
Let's say that Ben's car is paid off in a few months and they manage to go ahead and save half of what they re doing for the car payment.
So about $190/month for a year which is Maggie's timetable saving for a year $190/month gives them a down payment of $2,200 dollars.
Now, what if they make it two years? Two years they take that car payment and they're saving it. – that's $4,500 dollars and so forth.
So any time that you can have a time frame where you're just saving up ahead of time for the next car that's really to your benefit because having a down not only helps with you getting less of a loan meaning your lessened debt but also it gives you some negotiating power when you are out buying a car.
Key Takeaways on Car Loans
Before we close up I want to focus on some key takeaways I got when researching for this episode:
- Run the numbers before you start car hunting
- Save up for a down payment
- Ignore the hype
If you’d like to chat more about saving more, please join us in our private and free Facebook group – Thriving Families.
We’re families looking to support and help one another out. Hope to see you there!
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