Buying a Car? Here’s How to Avoid Debt

Topics: Reading time: 4 minutes

Guest post by Alpha Car Finance. They strive to bring affordable and quality cars to the Australian people, even to the ones with bad credit.

Buying a new car can be exciting, but you have to be careful about your finances. A lot of car buyers are scared to get caught in deep debt and a bad credit car loan. It’s common to feel overwhelmed and worried, especially when taking on a huge responsibility. Buying a car can be really expensive, so it’s important to do everything in your power to make sure that your money is used effectively.

Today, we are going to talk about how to get out of debt and how to avoid it before deciding on a new car. Whether you are looking into buying a brand new one, getting a car lease or car finance, it is important to take note of these tips. Buying a car can either be a great investment or a debt trap, so take these ideas seriously.

1. Know Your New Car Budget

First, the most important thing before deciding on getting a new car is setting a budget. Lay a specific amount down that you can afford and follow it. This can include your savings, your monthly income, and other budget that you have allotted for your new car.

Not setting a budget can easily get you caught in huge debt, so make sure to put your budget first before your preference in a certain car. If you walk into a car dealership without a budget in mind, you run the risk of getting taken advantage of and spending more than you can afford.

2. Increase Your Deposit

Unless you’re buying your car in cash outright, it’s common to put down a deposit on your loan. The more you can put down for your deposit, the less debt you’ll be in long-term. This can also secure you better terms on your auto loan.

If possible, put more into your deposit to ensure smooth sailing for the rest of your term. Make sure to put at least 20% of the total cost for your deposit. This way, you’d get to pay smaller amounts monthly. Pay with cash and not your card, as paying with a credit card can only get you in trouble.

3. Plan Ahead Long-term

Though it might sound tempting, don’t just go into a car lot and buy the first thing that you see. As we have mentioned earlier, buying a new car is a big responsibility.

Think about it a couple of times, and ask yourself questions such as whether you really need a new car, how much your budget is, and what type of car you need.

Being impulsive is the number one culprit to being caught deep in debt, so you definitely want to have thought things through. Plan everything out first, and make sure to stick to that plan. Research cars in your area, and decide what type is right for your needs and your goals.

4. Do Your Research

Next, the internet is there for a reason, and making the most out of it can do you a lot of good. Research about what car would best fit your budget, and if possible, do a test drive on it. While a car might seem perfect online, you’ll want to still see it for yourself in person to make sure it meets your expectations.

Nowadays, you have a lot of options when it comes to car choices, so maximise your time and test drive a few so you wouldn’t regret buying it in the end. Since this is a car you’ll want to get use from for years to come, take the time to thoroughly do your research and determine what’s best for you.

Where should you do your research? Some of the best car websites are:

Start with these and explore options in your area. These research websites compile the latest information to help car buyers of all skill levels understand their next purchase.

5. Pay Your Current Debts

Another important way to avoid debt when buying a new car is to make a point to pay all of your debts even before acquiring a new one. Debts can easily pile up. If you don’t take care of them, they easily balloon to a huge amount.

If you have extra money and you think you can pay most or all of your debts off, then go ahead and do that. You will be thankful that you did, as you only need to worry about your auto loan moving forward. For more information, decide who to pay first when you owe everyone.

6. Buy Used Not New

One of the most important ways to avoid debt when buying a new car is to not buy a new car at all. Buying a used car is almost always a better financial decision, especially considering how quickly new cars lose their value.

Unfortunately, new cars depreciate in value quickly. This is especially true for popular cars. As soon as you drive off the lot, your new car loses a large percentage of its value. Instead, buying a certified pre-owned vehicle will be a better value—without compromising on a great car.

7. Get an Inspection

We can all relate to the frustration of having to deal with car repairs. More importantly, these can get expensive really fast. The last thing you want to do is to buy a new (or used) car that is more trouble than it’s worth.

Instead, get a pre-purchase inspection. This is when you pay an independent mechanic to thoroughly inspect a vehicle before you buy it. They test everything about the car, making sure it’s running in great condition. Even if a car looks perfect on a lot, it might be hiding some issues below the surface.

8. Read the Fine Print

Before committing with a certain company on a new car loan, make sure that you read the fine print first. Large financing fees and additional fees can easily put you in trouble.

You can easily avoid these things by reading the contract first, and if you do not agree, then you can always look for a better deal. Additional fees such as insurance and the likes can be expensive, and these can eventually be the cause of huge debts.

Find a Car You Can Afford

Ultimately, a car can be a great investment. Though it won’t likely yield you a lot of money in the future, it saves you on other transportation costs. However, since this is a big financial decision, you want to avoid getting into more debt than you can afford.

When in doubt, work with a professional. The experts at Debt Busters have over a decade of experience helping Aussies handle their own debt solutions. Simply chat with us live or call us on 1300 368 322. We’re here to help!


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