This is part two of a two-part series! Click here to read part one (Steps 1-3)!
Step Four: Initial Investment and Purchase Price
The next step to not buying out of emotions comes down to knowing and deciding ahead of time what you want. Doing so will help you avoid the dealer gimmicks of upselling you on accessories or additional warranties.
Step Five: Payment & Financing
The fifth component comes down to your payment and financing.
I have mentioned before that I don\’t believe you can \’afford\’ a new car unless you can afford to buy it with cash-on-hand, without having to pull from the equity on your house or the retirement investments.
Now, I understand that is counter-cultural and that most of you will get a vehicle loan. But, if you decide to get a loan, get pre-qualified before shopping. I know that may seem obvious, but it\’s often not done. Interest rates are currently sitting so low that you may want to finance the vehicle. However, still consider the term for it.
The goal of margin is not just to shorten the term on loans. It\’s for building in flexibility to ensure that you are not so cash-strapped that you cannot step out of a role if you need to or take time off if needed.
Step Six: Maintenance Cost & Reliability
The sixth step comes down to taking a closer look at the maintenance costs and out-of-warranty items related to reliability. Many manufacturers like Toyota provide a period of time where basic maintenance and repairs are covered for the vehicle. We will be looking at this closer in a future episode, but for now, look at the estimated maintenance costs for the vehicle you are looking to purchase.
Step Seven: Depreciation & Sale
Finally, look at what the depreciation line has looked like for the vehicle. Many vehicles have been around for a long time, so you can track how they have held up regarding resale. Looking at the depreciation for a vehicle like the Ford F-150, you can run the estimated value based on your vehicle being three, five, seven years old.
Call To Action
Follow the adage that if you fail to plan, you plan to fail. If you don\’t have a plan, you will walk out of that dealership with a vehicle that doesn\’t fit your needs and wants, and you will spend more than you anticipated. Make sure to set up a plan and follow these steps.
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