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Awesome New Car Offers & Incentives May Not be so Awesome for Your Finances

Q: I’m a little behind on my bills because I’ve had to sink money into fixing my truck. A lot of dealerships are clearing out their inventories right now and offering great deals and low payments on new vehicles. They can also include funds in the loan that I can use to pay off my credit cards. Is this a good idea?

A: Replacing a vehicle is a big decision. Look past the enticing offers and let your budget help you decide if now is the time to buy. This will ensure that you make a smart financial, rather than emotional, commitment to your ride.

Always Consider Alternatives First

However, before you start thinking about a new truck, think about what you really need it for. You might be able to save some money, even for 6 – 12 months by taking transit to and from work. Insurance, fuel, maintenance and finance payments really add up, so the money might be better spent paying down your other debts. Even if you were to take a taxi once a week, or chip in when sharing a ride with a friend, it would still add up to much less than buying a new(er) vehicle right now.

What to Watch Out for with New Car & Truck Low Interest Loans & Incentives

If you decide that you do need to buy a vehicle, here are some things to keep in mind:

  • Most people don’t budget for weekly loan payments, so while they may look small, calculate what the equivalent bi-weekly or monthly amount would be.
  • Cash back or a sunny holiday may seem like it would solve your problems, but the extra cash is added to the price of the truck. This means that your loan will be higher and for more than the purchase price of the vehicle.
  • Only clients with really solid credit ratings qualify for 0% financing. The deal may not be so great if your loan is at 7% or more.
  • Sometimes the low interest period (e.g. 48 or 60 months) won’t be long enough for you to repay the entire loan with monthly payments you can afford or qualify for. If this is your situation, you will face a buy-out at the end of your loan, just as there can be with a lease.
  • If you buy a new car, you must adhere to the required maintenance schedule in order to maintain the warranty. Don’t forget to factor these costs into your budget.

It’s easy to dream about yourself behind the wheel of your shiny new vehicle, but without a little planning, your new truck can turn your dreams into a financial nightmare.

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