Buying a vehicle can be a daunting task. One way to make this experience less stressful, is by having a firm budget in place before you start shopping for a vehicle. A budget will ensure you don’t get into financial trouble or be swayed to sign a contract that gives you buyer’s remorse. Having a set plan before you shop for a vehicle can protect you from taking on more debt than you can afford.
If you are financing a vehicle, remember that some loans can stretch as far as 96 months. A long-term loan as opposed to a short-term loan may mean that you walk away with an expensive vehicle, but ask yourself if the total price of the vehicle is truly affordable.
Decide on the total amount that you are willing and able to spend over the long term before you shop and don’t forget all the extras such as the cost of regular maintenance and insurance. Remember, you can shop for credit just as you would shop for the vehicle you are buying. Not all places that offer financing charge the same interest rates.
If a dealership is offering finance-only options for consumers, make sure that the salesperson fully explains all the pros and cons of financing a vehicle before agreeing to the transaction. Remember, as a consumer, you have the right to pay off any non-mortgage loan in full any time after signing or to make an extra payment with any scheduled payments without penalty.
AMVIC has consumer resources to help you set a budget as well as a calculator to help you work out a budget that you can afford. There is also a consumer guide on the six steps of setting a budget to remind you of some key financial elements when shopping for a vehicle.
Other resources to consider is Service Alberta and Red Tape Reduction, which has resources to determine how much debt you can afford. The Financial Consumer Agency of Canada is another resource. The money and finances page has information on creating a budget, planning your finances at different life stages and how to protect yourself from frauds and scams.