Sometimes we get a new car because we want one, and sometimes we get one because we need it. Either way, cars are a depreciating personal commodity, so financing the whole thing gets the owner upside down really fast. That means that the car is worth less than you owe. For most of the life of the loan, this will be the case because cars start to lose their value as soon as you drive them off the lot. In that case it’s important to save a down payment before financing a car.
That can be a hard thing to do, but some folks who are not wealthy are always able to do this. A trade in can help a little, but not like a cash investment. The way folks save the money is they anticipate the inevitable. One day, they will have to get a new car whether they like it or not, so they start saving immediately. In this way, one doesn’t have to come up with cash that makes personal finances shaky. It might be a good idea to invest the money you’re saving in a CD so that it can earn a little more than a regular savings account. The more you save, the less you’ll have to finance.
Whatever you do, don’t fall for seven year finance options. That is way to long to finance a car. Even five years can make it hard to pay a car off before a new one is wanted or needed. Often times there are personal reasons for needing a new car. It could be that your family is getting bigger, or it could be that oil and gas commodities are just too high to make gasoline affordable in your current car. Whatever happens, you’ll feel much better knowing you’ve got a down payment ready to go when you need it.