Tax season is one of the busiest times of the year for car buying as the Internal Revenue Service begins to release tax refunds and consumers look for ways to spend their extra cash. This year, additional stimulus checks are adding another incentive for customers to make a big purchase and upgrade their vehicle. According to the market research firm Harris Interactive, one in three vehicle owners plan to spend some or all of their tax refund checks on their car or truck this year, with almost a quarter hoping to trade in for a new ride.
If you’re considering buying or trading in this tax season, there are a few important steps to follow to avoid common mistakes when purchasing a new car.
1. Shopping Without a Wants and Needs List. Your car needs to suit your lifestyle, your budget and your personality. Putting together a “Wants” and “Needs” list before you start searching will make the process much easier because you’ll be able to prioritize features and characteristics of the vehicle. For example, are you looking for an economical vehicle to get you around the city on a budget? You’re probably in the market for a compact or even eco-friendly car. Making a list of your personal needs and priorities can help you make a better car buying decision.
2. Not Knowing Your Credit Score. Another major mistake is walking into a dealership without knowing your credit score. Always know where your credit stands. Less than trustworthy dealers will try to work bad credit to their advantage, which could result in you paying a higher price and interest rate. Some online dealers have no minimum credit score, and car shoppers can even get pre-qualified financing offers with a soft credit inquiry, which will provide them with more information without lowering their credit score.
3. Buying a Brand New Car. Any car purchased brand new, fresh off the production line, loses value the minute you drive off the lot. In the world of cars, depreciation on a new car is much higher than depreciation on a used car — even a used vehicle that’s only a year old. That’s why it makes good financial sense to find a used car with low miles and minimal wear and tear. It’s almost as good as brand new, and in some cases, might still be under warranty. New isn’t necessarily better, so it pays to shop around and find a near-new vehicle.
4. Falling Into Financial Traps. Many dealerships extend attractive financing offers, such as no money down and low monthly payments, on the car you’re eyeing. Before you sign the dotted line, make sure you’re aware of the total cost of the vehicle and not just the monthly payment. The truth is, you will also be responsible for paying gas, insurance, scheduled maintenance costs, and repairs on the vehicle. Even if you can afford the monthly payment on a luxury vehicle, you need to factor in auxiliary costs for maintaining that vehicle to truly determine if it’s within your budget.
5. Forgetting the Inspection. Finally, if you’re looking to buy a used vehicle, a thorough inspection is one of the most important steps in making sure the car is up to standards. The minimal cost associated with getting the vehicle inspected by your trusted mechanic will give you peace of mind and establish any potential future issues up front.
Keeping a few important tips in mind will guarantee you come prepared and make the right car buying decision this tax season.