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No-nonsense Car Buying Advice

Auto BuyThe typical no-nonsense car buying advice you find in personal finance columns these days points has some pretty harsh personal discipline they would have you impose on yourself. For the most part, they would have you buy your next car for cash down. Barring that, they want you to never finance your car for any longer than four years and do it n such a way that you don’t pay more than 10% of your annual income in car payments. While all of that seems like fantastic financial sense, it boils down to one thing – if your family doesn’t make at least $65,000 a year, you can’t follow the formula. That leaves out most Americans as people who can’t afford a new car. Not even your average sensible Camry. Actually, spending 10% of your income on a car would be kind of going over the top for those families who have large house payments and credit card debts to service. Perhaps 5% of your gross income on a car would be more reasonable.

So how come the fact that they can’t afford a car has escaped so many otherwise reasonable and responsible American families? Well to begin with, car leaders are masters of disguise when it comes to putting out payment plans that seem to be more fair than they really are. They really stretch out the period of your loan. Most car loans stretch to at least seven years, sometimes more. Of course, this makes it look like you’re paying only a little each month and makes your car look affordable to you. But you end up paying a lot more in interest if you have fewer loans stretched out for that long. Sound car buying advice will always have you work out the shortest loan term possible. Why, they even let you get away without a down payment.

That’s a terrible idea. Just because they allow you to finance all of you car purchase doesn’t mean you should. They do this because it gives them a better opportunity to sink their claws into you and charge more interest. And the minute you drive that car out of the showroom, your car will be underwater – which means if you will owe more on the car that is worth selling on the market for. And of course, they let you buy a new car when your old loan isn’t paid for yet. Many people will also roll an old loan amount over to the new loan.

To let a little more sanity prevail the next time you consider buying a car, this is what you need to do. Look up Kelley Blue Book for how much your old car is worth. If you owe more on the car than it’s worth on the open market, and if you don’t have any money saved up to make up for it, the first thing you need to do is to consider buying gap insurance. Next, the soundest car buying advice for you would be to not buy a car until your current car is paid for. After that, you could save money and buy a car cash down or make a decent down payment. Consider buying a used car as an alternative.

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