Buying a car can be one of the most exciting purchases consumers will make. No matter what stage of life, a new car sparks a flurry of emotions. But before you head to the showroom or online to find the new or used vehicle you want, ask yourself a few important questions.
First, and most importantly: How much can you afford to spend?
“Examine your finances before you become entranced by a shiny new vehicle,” says Lucie Tedesco, commissioner of the Financial Consumer Agency of Canada. “Create a budget showing not only what you can afford to pay per month on a car loan, but also what you will end up paying in total for the vehicle. Don’t just take into account the sticker price: include sales tax and anticipated maintenance and repairs, insurance, fuel costs and parking fees, if any.”
The amount of your regular payments will be influenced by:
• the total price of the car;
• the term of your loan;
• the interest rate on your loan;
• the amount of your down payment, if any.
You should also order and review your credit report before starting to shop for a car. Any mistakes in that report could mean the lender turns you down or increases the interest rate on the loan.
After you’ve given your calculator a workout, you might discover that making the regular payments on the car you want may be more difficult than you expected, or the long-term cost of the loan might be too high.
At that point, you should consider changing your plans and buying a car you can reasonably afford.
Use FCAC’s budget calculator to help plan your purchase. You can also visit ItPaysToKnow.gc.ca for more information. – NC