Buying a new car can be exciting and stressful in equivalent amounts. Unless buyers are wealthy like the actor Peter Sellers, who boasted an exotic collection of Ferraris and Aston Martins, purchasers have to be aware of what they’re jumping into before they’re dropping wads of cash on new vehicles. Consumers should be thoroughly cognizant of what they’ve committed to purchasing, especially if they’re buying a vehicle on a payment schedule.
The Financial and Consumer Affairs Authority of Saskatchewan tutored consumers about the concept of vehicle negative equity – a situation where the consumer owes more for a vehicle than what it’s worth. Vehicle negative equity frequently happens, because purchasers have often favoured extended term loans (ETLs).
Shoppers can buy vehicles with no money down for monthly, biweekly or weekly payments, which might seem like inexpensive propositions at first. At one time, loans riding over four to five years were common. However, car buyers are often financing vehicles over periods lasting seven to eight years at the present. Since cars depreciate as soon as they’re driven off the lots, paying cash over eight years for rapidly devaluing items doesn’t appear to be sensible.
“We have seen situations where a consumer has traded in their old vehicle for a $70,000 new truck, but due to the debt still owing on their previous vehicle, the consumer actually had to pay $110,000 to acquire the new truck,” FCAA Deputy Director of Consumer Protection Denny Huyghebaert said.
To avoid the sticky trap of negative equity, the FCAA suggested purchasers should consider shorter term loans to lesson the risks. Also, buyers were instructed to make substantial cash down payments and pay off their existing loans. Consumers were further advised to avoid focussing on monthly payments. Rather, they should be considering the total cost of the vehicle and the length of the loan before agreeing to terms at the car lot. The FCAA said buyers should devise predetermined budgets when purchasing new vehicles.
Buying a vehicle involves planning and critical thinking. CarCostCanada instructed shoppers to narrow their choices when determining what vehicle would best suit their specific needs. Consumers should avoid sportscars like Porsche Boxsters, especially if they were meant to get family-sized vans to take the kids to school or hockey practice. Research to determine the best features and safety ratings is equally important when deciding on the right vehicle. CarCostCanada instructed shoppers to read over and study objective reviews submitted from current owners of the models they’d like to buy before stepping onto the car lots with bulging wallets and overflowing purses.
Shoppers were counselled to test drive every potential vehicle they’d scribbled onto their wish lists. According to CarCostCanada, the only way to know if the vehicle is right for them is to drive it first. Consumers should test drive vehicles for at least 20 minutes on the same types of roads they’d normally be driving on from day-to-day. Buyers also must take the time to examine the tactile features of the vehicles they want to purchase by moving the seats, mirrors and other features around. There’s more to buying new cars than simply circling each vehicle and giving all four tires a kick.
CarCostCanada said a salesperson will try to sell their cars for the MSRP (Manufacturer Suggested Retail Price). But in order receive the best price, consumers should know what the factory invoice charges actually are before agreeing to terms. Also, shoppers should realize what factory rebates are available on the cars they’ve contemplating on buying before driving those dream machines off the lot.
