2 Giant Car Buying Mistakes you Need to Avoid at All Costs
2 Giant Car Buying Mistakes you Need to Avoid at All Costs
Posted on September 29, 2022
Are you thinking about buying a car? Everyone needs a car to lead a normal life here in Canada because, let's face it, public transit in Canada has a long way to go before we have a viable alternative to owning our own vehicles. Here are some common car buying mistakes to avoid in Ontario.
Car Buying Mistake #1: Not having a Budget Defined
You've been told never to buy groceries on an empty stomach, and you should not try to buy a car until you've looked at your budget and determined what you can afford.
The 50/30/20 budet rule
It is considered good practice to keep tabs on your budget, especially with inflation tracking over 8% monthly!
If you have never created a budget in the past, you may feel slightly apprehensive, but there isn't much to it.
You simply list all of the income you receive on a monthly basis and then list all of your financial obligations, minus these obligations from your total monthly income, and this will let you know if you have anything left over that can go towards a car payment.
The average car payment in Canada is around $500 per month; use this number as a benchmark; if you have more than $500 left over, then you should be able to buy a new car.
How much to spend on a car. Source: credit donkey
If you have less than $500 left over, you should review your obligations and see where you can realize savings; one way to reduce costs is to cancel streaming services you no longer use.
Car Buying Mistake #2: Thinking your Local Bank is Going to Give you the Best Terms
While your local bank may pride itself on providing personalized service, it will not have the best car financing terms.
The same local bank will usually have stricter loan underwriting requirements, so you may not qualify for their so-called best terms even though you've been doing business with them for years!
These banks have a considerable amount of overhead, rent, staff, etc... which is passed on to you, the consumer, with higher interest rates.
There are lenders who specialize in auto financing and offer loans throughout all of Canada.
These lenders are able to offer lower interest rates because they have an economy of scale, which helps them reduce costs.
These lenders do not have brick-and-mortar offices and are not accessible to the general public.
The only way you can access these lenders is through a local dealership. The lenders are able to streamline their processes by working with firms that provide the largest number of car loans, namely local dealerships.
Car Buying Mistake #3: Not Budgeting for the New Car
Not budgeting has to be one of the biggest car buying mistakes. Do you know how much per month you are willing to spend a month on a new car? Along with the price of the car, you also need to include the insurance and maintenance costs associated with owning one.
If you haven’t made a budget before, don’t worry about it. Most of us were never taught budgeting in school, so creating a budget could make you feel anxious.
After you have created a budget, you will know if there is room in your budget for a new car. If you don’t have room for a new car, then you should consider getting a used car.
Used cars usually have a warranty on them; if the car you are considering does not have a warranty, you should buy an extended warranty for added peace of mind.
Accessing the best car loans
You may think you don't qualify for these awesome car loans, but if you do, the dealership will work hard to get you approved, no matter your credit score or income situation.
But you need to make the first move and reach out to the dealership right away; it will be the best call you made in a long time.
The dealerships have access to interest rates and terms that no one else can access, creating a win-win situation for everyone involved.
If you're ready for a car loan in Southern Ontario, we'd love to help with that! simply fill in the form below to get started.