Buying a car, whether used or new is a long-term financial commitment and it should be a properly calculated decision. This decision requires consideration of all financial aspects, including your financial state after you make your purchase such as monthly loan installments, road tax, insurance, the cost of petrol, maintenance, and emergency repairs.
Mistake 1: Thinking Used Cars Are Low in Quality
There is a common misconception that all used cars are unreliable and risky – this is why many first-time car buyers tend to choose a brand-new car over a used car as they think used cars are poor quality and filled with maintenance issues.
But that’s not entirely true as some used cars are an excellent first car option. Not only are they usually sold at a more affordable price, but used cars have also gone through steep (first five years) depreciation rates, which means they suffer lower depreciation rates in the future and require less insurance coverage. Here are some of the differences between buying a new car and a used car for your comparison.
|Depreciation Rate||Depreciates faster (especially in the first five years).||Depreciates slower (the car has gone through the steep depreciation)|
|Overall Cost||Requires you to spend more on service and maintenance.||Do not require you to spend as much as the car chosen has been maintained well.|
|Insurance Coverage||Higher coverage.||Lower coverage.|
Mistake 2: Not Doing Your Research
You may seek out advice or recommendations from friends and family, but it is best to spend time doing your own research as well – this means shortlisting the brands you want, the type of car you need, as well as other factors that might be of importance to you such as boot space! r. There are different aspects to a car that you would have to factor in when you shop for your perfect first car such as fuel economy, engine capacity, cabin space, safety features, and price.
There are plenty of articles and guides online that offer you in-depth information on these important factors. Here are some guides of ours that you can check out:
- 10 Tips to Follow Before Buying a Used Car
- A Guide to Car Loan and Interest Rates in Malaysia
- Car’s Market Value and Depreciation Rate
You can also check out our car reviews as a place to start. But always remember to base your research on your needs and wants in a car.
Mistake 3: Not Knowing Your Needs & Wants
You should not base your decision based on how the car looks. Instead, plan out your budget and lifestyle needs like is the car for your family, are you buying a car for work purposes, what terrains will you be driving on frequently, how much of space do you need in the car, and so on. So, with these answers in mind, you would be able to pick out a car based on your needs and wants when you visit a dealership, and you won’t be easily tricked into buying a car that is way beyond your budget and needs. Some dealers might use this as an advantage to sell you a cool car just to clear off their inventory or make sales.
Mistake 4: Love at First Sight
Have you ever set your eye on a car and thought, that is the car I want? Without even knowing anything about the car, you automatically want to own it just because you like how it looks (or how you’ll look driving it). But, what good would a two-seater car be when you have a growing family, or what good is an SUV if it is just going to be a burden on your finances. Before you buy a car, always base it back to your needs, as performance, looks, color, and others can always be added on later.
Mistake 5: Not Checking the Car’s History Report
There is more than meets the eye – a car that appears in good condition does not always reflect the actual situation or the health of the car. This is why it is important to check its history report, or the inspection report (Carsome discloses all details of its 175-inspection on its listing!). The history report shows you how well the car is maintained and if it has been serviced according to its schedule. The inspection report would also show you if the car has been through any major accidents or has any frame damage. If you are not sure of what to look at, bring along someone who is well-versed with cars to help you go through the reports.
Mistake 6: Not Test Driving the Car
Before you jump to buy the car, opt to test drive it first. Test driving the actual car would allow you to test, examine and identify the overall quality of the car.
You are also advised to test two or more cars that are similar in year, model, and make as they can vary in ride quality, performance, cabin noise, as well as options, among others.
Mistake 7: Not Factoring in the Monthly Payment Into Your Financial Commitment
When you buy a car, your overall budget should include more than the price of the car and what its monthly payment would be. You should also include costs like interest rates, additional warranties, emergency services, petrol fees, yearly road tax, and insurance to your overall budget to get how much you should spend on your first car purchase.
Mistake 8: Accepting Long-Term Financing
First-time car buyers are often attracted by longer financing terms because of its lower monthly payments, or zero-down-payment offers. However, be wary as these offers would just tie you down to higher interest rates. Though a longer loan term lowers down your monthly loan payments, it indirectly increases the overall cost that needs to be paid.
For example, Ali bought a used car for RM100,000. Ali then takes a loan with a three percent interest rate and a 10 percent down-payment (RM10,000). Here is a breakdown of how much Ali would have to pay if he took a five-year versus a nine-year loan repayment period.
|Loan Repayment Period||
|Loan Calculation Formula||Total Cost of Loan + (Total Cost of Loan x Interest Rate x Years) /Months|
|RM90,000 + RM13,500 (RM90,000 x 3% x 5) / 60 Months (5 Years x 12 Months)||RM90,000 + RM24,300 (RM90,000 x 3% x 9) / 108 Months (9 Years x 12 Months)|
|Total Interest Paid||RM13,500.00||RM24,300.00|
From the calculations above, you can see that Ali would be paying RM10,800 more in interest if he takes out a nine-year loan, compared to a five-year loan – that’s 80 percent higher in interest to fork out!
Mistake 9: Not Understanding the Auto-Finance Contract
Purchasing a car also means that you will need to sign various documents or contracts outlining the details regarding your sale. It’s always best to make sure you understand everything that is stated in the documents and contracts before signing them to avoid any complications down the road.
Make Sweet Memories With Your First Car
Buying your first car is truly an exciting experience, so take your time to do your research and buy the car that fits your needs according to your budget. If you are afraid or unsure of what you are doing, bring someone along who has been through the experience with you if you can, and pay attention to these mistakes listed above.
To make things easier, you can always check out Carsome’s huge inventory of quality used cars. Covering 175 inspection points, used cars sold by Carsome are definitely Carsome Certified, with no major accidents, frame, or flood damage. In fact, if you get your car through Carsome, you will enjoy a one-year extended warranty and a five-day money-back guarantee under the Carsome Promise. Check out the website to know more.