As Chartered Accountants in Toronto we often see individuals make big mistakes that cost thousands over the life of their vehicles. Here are 5 mistakes to avoid when borrowing to buy a car:
1. Not shopping around for the lowest rate on their loan or lease: A bank loan may cost you less than one from your car dealer, or vice-versa. Do your homework because a low rate can save you thousands.
2. Comparing car prices and forgetting about the cost of borrowing: The total cost of a car is the purchase price+ any dealer fees, cost of borrowing (interest expense) and sales taxes. Just like you negotiate your purchase price make sure you get the lowest interest rate.
3. Not getting the best rate for the whole time you borrow: Be sure to find out how much interest you’ll pay over the whole time you borrow. Compare that to other loans and make sure it’s still the best deal for you.
4. Not looking at the TOTAL COST OF OWNERSHIP: Loan payments are only part of the cost of owning and driving a car. What about costs for gas, repairs, insurance, licences and parking? Budget effectively to ensure you still have money for savings.
5. Looking at the size of the monthly payment, not at how much interest you’re paying: Just because we can afford a monthly payment doesn’t mean we are getting a good deal. Don’t forget to look at how long you are borrowing the money. Getting a bad rate could mean making payments for another year before your car is paid off.
SRJ Chartered Accountants are located in downtown Toronto and Mississauga. Please email us at email@example.com for more information.