When Buying That Car: Don’t Rush

When it comes to buying or leasing a new car, there are usually a lot of people telling you to hurry up.

If you have kids, there could be one or more very eager, and sometimes very persuasive, youngsters in your life urging you to buy the latest, the most shiny, the most expensive or the most sporty looking car you can find – and get it home right away, thank you very much.

The same, roughly speaking, might be true of your spouse, who would urge you to make up your mind quickly. Maybe your parents are urging you to choose a brand that they have some loyalty towards. Sometimes your employer pushes the process, because they want to make sure you get to work on time.

But there’s a surprisingly impartial observer to this process that would urge you to slow down when you buy a car. The Federal Trade Commission is looking out for your interests to ensure that this major transaction goes smoothly.

To those of us who begin the car buying decision with “I want something red, fast and sporty-looking,” the Federal Trade Commission would pointedly say we were starting at the wrong place.

The first decision to make when buying or leasing a car shouldn’t be color or the power of the stereo system. The first decision is about financing.

Get financing first and understand it thoroughly, the federal agency advises. In general, that means two kinds of financing should be explored: Direct financing from a bank or other lending institution, or dealership financing through the seller.

Step one, before that, is to look at your own finances and see what you can afford. If your income does not exceed your monthly living expenses, you may be better off using public transportation for a while. But if you can afford a loan, then you can think about buying or leasing a vehicle.

Remember, there are various financing deals from both banks and dealerships. You should shop around. Different banks can offer fixed or adjustable interest rates and may or may not ask for someone to co-sign the loan, which could possibly be required if your credit score is low. On the other hand, dealerships also have a variety of finance deals, which can include factory or brand-oriented incentives. Car companies, to put that another way, can offer low financing deals to attract customers, whereas with banks loans are arranged first, then the consumer shops for a car. (In this situation, banks might give you 30 days to close on a car or the loan could be rescinded.)

Notice how un-car-like this message is. See what you can afford, then shop around for a loan. It isn’t sexy or exciting, but it’s the sensible way to go.

Cars are one purchase that depreciates over time, as opposed to a home in which the value under normal economic times, tends to rise. Before buying, you should carefully review the average re-sale value of the brand and models you are considering.

You might have positive or negative equity in the car you already drive, if that is the case. Negative equity is when, early in the loan, you owe more than the car is worth. On the other hand, some lending arrangements allow you to buy a new vehicle but also provides cash to pay off what you might still own on the car you are selling if your loan has not been fully paid off. That might put you back in negative equity.

From the point of view of a dealership, there are three interactions with customers. One of these is the sale or lease of a car, new or used. The other is the financing offered. The third is the purchase of the used car you might be trading in.

You don’t need to guess. There are online loan calculators that calculate the size of a monthly payment based on what the consumer inputs on price, interest rates, down payments and other data. The Ford dealer in Pembroke Pines in Florida and other dealerships have online calculators for figuring out the price of the trade-in based on information that includes make, model, mileage, and descriptions of the car’s general condition.

Loans are not particularly complicated, but they are serious contracts that consumers should know and understand beyond just the words on the page. Consumers should also understand the long term implications should they fail to keep up with their end of the contract.

The best two words of advice for car buyers: “Don’t rush.” 

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Faisal

Faisal is the cofounder and automotive photographer at Unfinished Man. He provides insider perspectives on the latest rides through his acclaimed photography. Faisal also serves as the site's watch expert, staying on the pulse of emerging timepieces. His seasoned eye for men's lifestyle products makes him an authoritative voice.

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