This week…what you should consider when deciding on a new or used car:

 

Do you have a down payment or a trade-in? The smart financial move is to pay for your car in cash and avoid a loan altogether. If that’s not possible, you should at least have a sizeable down payment. In fact, with a used car, a down payment or trade-in is almost always required. But maybe you don’t have much for a down payment. But there is another option as some financial institutions might cover the down payment, meaning you can put zero down—if you have good credit.

 

That option might be tempting, but it’s also risky. If you suddenly lose your job – and you realise you need to sell this expensive new car. The best you’ll probably be able to get for the car is about 80% of the asking price, but if you’ve made no down payment, even selling the car right now will leave you with 20% of your loan unpaid and nothing to show for it. You should make a sound financial decision based on your situation. Overall, consider your down payment or trade-in options, and weigh your choices.

 

Should you take the depreciation hit? Some new cars can depreciate up to 50 percent in the first three years.  With a used car, much of that depreciation has already taken place. Of course, if you plan on driving your car into the ground, its depreciation won’t matter.

 

Can you afford to maintain a used car? If you decide to buy used, there’s a chance that you’ll inherit maintenance problems. If you buy a newer-used car, you might still be under warranty.

 

Can you afford the time a used car spends in the shop? Along with the maintenance costs, a used car may spend more time in the shop. Does your lifestyle allow for that down time? With a new car, you don’t have to worry about this as much.

 

Next week…homeownership

 

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