Lowering the finance cost onyour next vehicle purchase©2002 by Kyle Busch, author of:"Drive the Best for the Price ...Before making a purchase, especially a large one most buyersponder an equation that goes something like: What is it going tocost me, and will that equal what I am going to get?Consider that equation when buying your next vehicle. Naturally,you want to get the most vehicle for the money you spend. Hereare several tips that will help you to lower your transportationcost.First, and foremost, consider eliminating some of the steepdepreciation cost incurred during the first three years of vehicleownership by purchasing a 2- to 3- year-old used vehicle.The price can be further reduced by paying cash. However, if youneed to finance your next vehicle purchase consider doing thefollowing to keep its cost closer to the "as if you were payingcash" figure.- Take the time to carefully identify your current andyour future transportation needs, and choose anappropriate vehicle. Transportation represents differentthings to different people.For some drivers, it represents status in society. Otherdrivers place greater emphasis on reliably just gettingfrom point A to points B and C.The more closely that you match your driving needswith the vehicle you buy, the more driving pleasureyou will experience and the more likely you will wantto hold on to the vehicle. When you reduce unnecessaryvehicle trades, you save money.If you can't fully identify your transportation needs orthe vehicle that can best satisfy them, consult theApril issue of Consumer Reports at a public library.The publication groups vehicles into categories,provides frequency-of-repair information for manyvehicles, and gives vehicle price information.It is a good idea to identify 2 or 3 vehicles in aparticular category that meet your transportationneeds. This enables some latitude when shoppingfor the vehicle.- Identify how much you can afford to spend per monthon transportation. A rule of thumb suggests that thecost to rent an apartment per month should not begreater than 25 percent of your monthly net pay.The cost of an auto loan should not exceed 10to 12percent of your monthly net pay.In some instances, leasing a vehicle could be abetteroption than taking out a loan.- The vehicle down payment should be the largestpossible, and the amount of money borrowed thelowest possible. In addition, borrowing money forthe shortest period of time (i.e., a 24-month loanrather than a 48-month loan) will reduce the overallcost of the loan.- Identify the various loan sources such asbanks, savings and loans, credit unions,and national lenders. For example, go onlinetoask jeeves.com and specify "automobilefinancing sources."In regard to national financing vs. local financing,it can be useful to determine what the cost of aloan would be from the national sources, butaccept a loan from a local source if the loancost is comparable or nearly comparablebetween the two.Compare the APR (annual percentage rate)that each of the sources will charge for the loan.The cost of a loan is negotiable. Therefore, becertain to inform each source what the othershave to offer.In addition to the loan's APR, remember to alsocompare the other costs associated with a loan,such as loan insurance and loan processing costs.- Be certain to read and understand any fine printcontained in the loan contract. Insist that the loancontract gives you the option of making paymentsearly and that the payments will be applied on theloan principal with no penalty or extra cost if youpayoff the loan early.- Do not settle for a vehicle that does not entirelymeet your transportation needs because of low dealeror manufacturer incentive financing. Sometimes dealersor manufactures offer extremely low APR financing onvehicles that the dealer is having a hard time selling.That's why it helps to have initially identified the correctvehicle before encountering the sales pitches and otherinfluences of buying a vehicle.Kyle Busch is the author of Drive the Best for the Price:How to Buy a Used Automobile, Sport-Utility Vehicle, orMinivan and Save Money. He has over 300,000 miles onhis 1986 Volkswagen Jetta-a used vehicle that he boughtin 1991 for $2,600.Buy the book:- Kyle's book, "Drive the Best..." is the source of these articles and many of the invaluable motoring tips to be found on our Websites. Saving money, improving reliability and having a more attractive automobile are just some of the things you can have if you read and apply some of the gems found in his book.
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