What is an annuity payment of a car? Seven tips for buying a carWhat is an annuity payment of a car? Seven tips for buying a car
Buying a car is expensive; in fact, it is one of the biggest expenses we make in life. If you have already evaluated your economic situation and your lifestyle, and have decided to make a vehicle, you must plan the form from now on. Fortunately, here we tell you seven things you should know before buying a car:
1. Identify and compare the Need with the Reality.We should not choose a car because of its aerodynamic style or simply because we like it. Consider that it is something that you will live with for several years and therefore, we recommend being pragmatic and choosing according to our needs and our budget. Think carefully for what you want your car and choose the model that best suits your lifestyle. Be realistic with your portfolio, evaluate your monthly income and consider what you get.
Obviously, in the end we must choose a car that we like, serve and reach us.
2. The cost of the car is much more than a monthly payment.You should know that spending on a car is much greater than it seems at first glance. At the initial moment of buying a car, you should consider that the amount must cover the cost of the unit, the cost of the plates, the legal paperwork, the opening cost (in case of financing) and the cost of the insurance. In addition to the initial and annual costs (such as tenure, license plates and insurance), consider the common day-to-day expenses such as gasoline, parking and maintenance. As a rule, do not commit to making an expense for the following years that exceeds 30% of your salary. If you cannot afford it, what you should do is save, so you can give a larger down payment (or even pay cash) and the monthly cost of the car does not exceed that number.
3. You are acquiring a liability.As much as we like to say that we are making "an investment" when buying a car, you must be clear that what you are acquiring is a liability (not an asset) and that this will represent a constant expense during the time you have it. Although, when buying a car we make ourselves a material good that we can then sell (and recover our money), we must be realistic and understand that it is a low-liquid asset, which we cannot convert into cash from one day to the next. Even so, consider the models that maintain their value better over time, so that at the time of selling, you recover as much as possible.
4. Do your research task.The word task generates us laziness immediately, but it will avoid many long-term problems. Buying a car is exhaustive, it takes time and effort to do an investigation of what really suits us. Do not trust the seller who is very cool because, basically, he is a seller. When you go to an agency for an advertisement or a specific offer, you saw elsewhere, first call the place, because sometimes those offers are just "traps" to attract visitors, but at the time of being there the offer has magically ended. Invest time in research, read specialized blogs, ask your acquaintances, check the gas mileage, the resale value of the unit, maintenance costs, driving experience, among others. Ask what is the line of cars with which the model you are interested in buying competes. All brands have different models that compete with each other, so you can compare prices, design, payment facilities, maintenance costs, spare parts, driving experience, among others. Also, check the age of the design, a line undergoes big changes every 4 years approximately, so be careful and avoid buying a line that will change to next year.
5. PREPARE TO NEGOTIATE.Although the agencies present very definite and specific figures, they all want to sell and therefore, all are willing to negotiate. Be prepared so that each seller you meet will be looking for you over the phone during the weeks following your visit. Study negotiation strategies, you must know what you are talking about and be ready, or at least pretend to be ready to make the purchase. If you have already purchased more than one model with a certain brand, ask your agency if you can obtain facilities as a premium customer.
6. KNOW YOU ARE FINANCING.If you are going to get the car through financing, you should know what you are getting into. From the outset, do not assume that the financing offered by the agency is the best. Many times, it is better to look for a loan financed by another party, such as in your bank, and negotiate a favorable interest rate. Now of acquiring a financed credit, we recommend three things:
- Pay as much as you can for hitching. Although the credit does not include the amount you pay, it is essential in the equation. The more you can pay down, the lower the credit and therefore, the less you have to pay for interest.
- Find the lowest interest rate. The most normal rates are between 10 and 12% (Mexico, 2015). The institution will charge this percentage (of the amount of the debt in a certain period) monthly for lending that money. It is not very difficult to get lower rates and there are always better offers when you have a good credit history and an account with savings. Look for the interest rate to be less than 10%; it is even possible to find less than 9%.
- Do not extend the time to pay lower monthly payments. The longer you are paying, the more expensive you get. Make an effort to give a high down payment (down payment) or to pay an important monthly payment.
Note: to get better rates and better credits, you must have a healthy credit history. If you still do not ask for a large credit, credit cards are the right tool to generate that history.
7. PREPARE THE STATIONERY.If you will obtain the car through a financing, it is opportune that you prepare the stationery that you will be asked to give you the credit. This may vary depending on the agency, bank or financial institution, but usually the following documents are requested:
- Official identification (INE)
- Proof of address
- Payroll receipts or account statements (minimum of the last 3 months)
- Credit application (granted by each institution)
- Letter of authorization for the credit bureau
Extra: Learn the vocabulary.When the seller of the agency makes a financing proposal, he will mention some important terms that you need to know in order to fully understand your purchase. Some of them are:
- Financing: It is the credit that they give you, it is structured in a schedule of times and payments in which you must finish paying your car. This financing has to be approved by the bank and mainly depends on your credit history, that is, how reliable and responsible you have been with the payment of your past debts. The option is for those who cannot buy the car in cash (that is, in a single payment).
- Hitch: Initial amount you need to get the car from the agency. This amount can be from 10% of the total cost of the unit, but the percentage is determined in the negotiation with the agency.
- Annuities: It is a payment option that you can choose in which you commit to pay each year and thus reduce the monthly payments.
- Commission fee for opening: It is the amount that the bank charges you to open an account (you’re financing). The most common is that this cost is zero, $ 0, and serves as a sales strategy to convince you that you are getting a large discount.
- Interest rate: It is the monthly amount charged by the bank for making the loan. An ideal interest rate is less than 10%.