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Don’t be too easy on “buying a car”

on Mon, 04/24/2017 - 16:39

Over the years, I realize, living in big cities like Toronto, people always struggle with whether they want to buy a car. 

Car buying is like a mini excise on property buying or renovation. No matter how many times you crunch your numbers, when it happens, there are always things going to cost you more.

I have seen multiple times clients thought it was better off for them to get a car, and that whole things turned out to be a mistake. At the same time, there are of course many cases, car buying only makes sense.

This article is just to raise awareness so that you can think twice before you act. Here is what one of my client’s calculation before and after he bought a car:

What you need to consider (really) BEFORE getting a car:

Monthly payment:

Not only whether you can carry that payment for whatever long time the term of the contract is, that payment itself can make or break a mortgage you are going to get down the road. Knowing ANY debt payments (plus property tax) can only be 40% of your gross income, taking up a payment of a few hundred dollars could heavily affect your ability to get qualified for a mortgage.

You should be also aware that there is tax on everything, and make sure the monthly payment being presented to you is tax in.

Insurance rate: 

As we all know, Ontarians pay the highest auto insurance rate in the country and that could affect your overall ability to be able to save as well as to spend. Knowing EXACTLY what your insurance rate will look like can help you in control with your monthly cash flow.

Down payment amount:

You might know already, the more down payment you put, the lower the monthly payment will be. There are also delivery fee and certain charges might needed to be paid BEFORE you can take that car home, make sure you are aware of what is “due on delivery”.

Happy car-buying :)

Little extra: this client eventually got lower insurance premium so the whole thing makes more sense to him now! 

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