Kids may derive pleasure from being “upside down” but for adults, the case couldn’t be farther away from this. For adults, the reality is “upside down” simply means being indebted to a large asset far beyond its value. No few home owners were victims of this; being upside down in their home loans between the years 2008 and 2012.
People don’t understand a man who purchases a car-especially a new one-can be indebted for months or even 2 years in the car loan. You may ask this question: Why is owing more than an asset’s worth so significant if you’re going to keep the asset for several years? The asset being a car in this instance?
For one, issues arise if the automobile is stolen or suffers a crash. Issues are compounded once the buyers realize they made a purchase well beyond what they can maintain and afford in the long run. More issues keep arising, like medical expenses, safety hazards (floods or fires) and new job opportunities that force you to change places. Even an increasing family with new babies all culminate to tighten budget faster thanyou can believe possible.
And what happens if you put the car on sale? You incur extra charges and end up paying the bank additional $1000 to $5000 simply to fulfill all loan requirements.
A smart, car buyer plans far ahead. He takes into cognizance his financial capabilities and tweaks the car-buying plan. Doing this saves him the trouble of going upside down.
Buy Used Cars and Secure a Good Deal
It’s no secret that used cars possess far lesser value than new ones. 11% of this value is lost once a buyer drives the car away from the dealership. A year later, this number rises to 20% and half a decade later, over half of the car’s value is gone for good.
These average numbers don’t exactly reflect a broad variety of the depreciation rates of all manner of cars; the rates are higher for unpopular cars and lower for the more popular models. Then again, who’s to say what will be popular 5 years from now?
The main point is this: The first and original owner should pay depreciation cost for the first few years. Why? Because that’s one of the highest costs among the many others necessary for vehicle ownership.
Purchase a vehicle that still has value. Finance management websites and organizations like Bankrate.com can come in handy for this, as they list the vehicles that retain the most value even when they should have lost it.
For instance: The top vehicles for the year 2014 are the Mazda 3, Hyundai Accent, Toyota Avalon, Kia Soul, the Chevy Corvette and Chevy Camaro. Surely one-or even all of these-catch your fancy, no?
Another advantage of purchasing a used car with low depreciation rate is the fact there is a lesser chance you’ll incur a “hangover” loan amount that carries over to a new one when you desire a new car.
Place a 20% Down-Payment
Such a move will see all taxes and fees are handled properly. To pay interest on such taxes means a push for the abstract fees to rise even higher, and since those who purchase these get nothing for the charges, dismissing them sooner than later is the wisest of choices to make. And placing 20% gives you a push ahead of depreciation, meaning you get to drive away in a vehicle worth far more than your loan. And of course it’s very likely the manufacturer’s cash-back rebates will be lowered to about 20%.
Consider Applying for a Loan That Doesn’t Exceed the Amount of Time You Intend to Keep the Car
No few people have this habit of purchasing new cars every few years or so. Conversely, there are those who derive pleasure and comfort in driving around old, 20-year old beaters. Car loan terms normally extend to a period of 5 years-although 6 is now the common. Even 10-year loans have now found their way into the market.
If a car owner intends to use and keep acar until it ceases to function anymore, then a 10-year loan is sensible. And if you have an ever-expanding family (new kids and kids going off to college), then it’s likely you’ll be trading up or down to accommodate these changes.
Get the Best Interest Rate Your Application Can Qualify You For
Numerous online outlets and other banks are likely to offer you lower loan rates simply because they operate under a fraction of the marketing cost that sustain the largerbrick and mortar banks.
You see, these online banks do not normally have shareholders perpetually demanding profit year after year. Though the difference in loan rates may be a mere one-and-a-half percent, the aforementioned charges culminate to become thousands of dollars saved over a period of 5 years.
Make certain you always patronize numerous shops as you seek a car, because only then will you find the lowest and most affordable price for your car of choice.
Few things can spark emotions in us as much as buying cars do. Yes, new homes (and perhaps shoes, for the ladies?) are large purchases that evoke such emotions too, but not nearly as intense as the ones we get from seeing a new car in our garage.
Cars are more than just transportation machines. They reflect our identities and essentially become our accessories for over two decades. If your eyes find and instantly desire a pumpkin and spice-colored Kia Soul, then chances are there will probably another variant of it in the following month.
So when you step into a car dealership, make sure your emotions are kept in check. Choosing a car is something that should be done with the mind, not the heart. Have thisknowledge at the back of your mind: You’re saving more than just $2000, rather your savings add up to $2000 and over 6 to 9 percent of yearly interest. Such knowledge will undoubtedly guide you to make a smarter decision.
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