The automobile seems to cause more people financial problems than any other item.

By some unusual process, this "necessity" almost always becomes a luxury. At purchase time, the buyer briefly loses control and adds costly extras. From my perspective, most automobile accidents happen on the car dealer's lot.

Remember, the right car is out there. Refuse to buy until you have found it. - John Avanzini

Because the average auto depreciates rapidly, it cannot be considered a long-term asset. It must therefore be purchased very carefully. It also must be paid for in such a way that when it wears out, enough money is available to replace it.

Rules For Purchasing
When you must buy an automobile with time payments, strictly follow these rules:

1. Do not use time payments to buy an "ego satisfier." An expensive car should be yours only after your faithful financial stewardship has qualified you for it.
   
   
2. Be sure the auto you buy suits all your transportation needs. It must have enough room to carry your entire family comfortably. It must be both utilitarian and suitable for formal appearance.
   
   
3. Consider gasoline mileage. (Very important.)
   
   
4. Consider the warranty. (Also very important.) When purchasing a new vehicle, always buy the manufacturer's extended coverage. Make sure the manufacturer backs it and will pay the mechanic's bill at the dealership.
   
   If you buy a used car, choose the right dealer. Most reputable ones offer warranties. Be sure you understand the terms. Wording can be deceptive.
   
   
5. If your summers are hot, buy an air-conditioned car.
   
   
6. Ask if the dealer has any demonstrators from last year. These usually are greatly discounted.

With these thoughts in mind, list what you need and can afford in an automobile. Remember, the right car is out there. Refuse to buy until you have found it.

Financing an Automobile
When you must buy a vehicle on time payments, several things can help pay it off much faster.

1. Sell your trade-in yourself. You can get up to 25 percent more than from the dealer. If you don't sell it before you buy, trade it in for whatever the dealer will give you. When you buy, it is much more important to lower your loan amount than to get the most for your trade-in.
   
   
2. Early payoff is a must. It is important that the lender allow you the right to prepay your new-car loan.
   
   
3. Always take the price discount. No matter how low the manufacturer's interest rate is, they usually will discount your new car hundreds of dollars if you pay cash.
   
   
4. Use all available cash. Use all your trade-in and dealer-incentive money, and as much cash as you can, on your down payment. Every dollar you pay down is a dollar, plus interest, that you will not have to repay.
   
   
5. Bank on good financing. It is usually best to finance with your bank or credit union. Their interest rate may be higher than the manufacturer's but they tend to be much more flexible. Insist that your loan allow prepayment.
   
   
6. The Down-Payment Blitz: As soon as you decide to take out a new car loan, declare war on it. Ask your lender if you can borrow the entire amount you plan to finance in two loans.
   
   The first one will be a ninety-day, interest-only loan for the entire cost of the automobile. This allows you time for your "down-payment blitz." Promise him you will refinance the lower balance into monthly payments at the end of ninety days.
   
   
7. This will let you add as much cash as you can to your down payment. During this time, work as much overtime as possible, have a garage sale and sell all unneeded assets.
   
   Any extra down-payment money you earn during this time should be paid to the bank the day you get it in hand. The quicker you repay the ninety-day loan, the lower your overall interest cost will be on that loan. At the end of ninety days, refinance the remaining balance for the shortest time possible.

Please remember: these suggestions are subject to the approval of the manufacturer, your dealer and the lender. I hope they are a blessing to you.

Source: The Basics of Abundance by John Avanzini
Excerpt permission granted by Harrison House Publishers