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How to Make Sure Your Car Payments Don’t Outlast Your Car

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Remember when your car was brand-new, or at least new to you? The new-car smell, the clean carpet and upholstery and the rattle-free ride that sold you on the car? Many years or many miles can make the day you drove off the dealer lot seem like a distant memory. But some of us have car payments as a reminder of that day. And now some of us have both car payments and repair bills — and we may worry that our cars will give out before the payments end.

That’s a scenario you’d like to avoid, but it’s one that’s hard to think about when choosing a new ride. It’s easy to think of a “comfortable” monthly payment without thinking as much about how many months you’ll have to make it or how soon your car is likely to need maintenance and what that might cost.

Financing: How Long Is Too Long?

Philip Reed, senior consumer advice editor for Edmunds.com, advises financing for as short a time as your budget will allow. He suggests a maximum of 60 months for a new car and 36 months for a used car. (If you’re leasing, he said the maximum term should be 36 months so the lease doesn’t exceed the included warranty.) It’s worth noting that loans — even for used cars — are available for 84 months (that’s 7 years). But interest rates on those longer-term loans are higher, and even if you drive that used car until the wheels fall off, you may well still owe money on it when that day comes.

The Price You Pay

You’ll also want to know what you want to avoid when shopping. Reed strongly advises checking on cars’ retained value, particularly if you expect to trade it in or sell it someday. He also advices staying away from “buy here, pay here” dealers. You will likely pay a much higher interest rate than you would elsewhere, and that means you are more likely to be upside down on your car loan — and for a longer period of time. Finally, read the contract before you sign. Make sure you understand all the terms.

It’s smart to shop for financing before you shop for a car. You don’t want to be surprised by what’s in your credit report, so check it yourself to be sure it’s accurate, and dispute any error if it isn’t. You can also use a free tool like Credit.com’s Credit Report Card to see two of your credit scores. A bank or credit union can often approve a loan ahead of time, letting you know what payments will be for the term and amount you seek to borrow. If you walk into a dealer with a loan already approved, you’ll also be conscious of the total amount you can spend (including tax and any dealer fees) and can steel yourself against possible suggestions that you extend the term to buy a more expensive vehicle.

How Much Maintenance?

Once your vehicle is in your driveway, the best way to make sure it lasts is to take good care of it. Regular oil changes and tire rotation are crucial, Reed said, and new-car owners should make sure the required maintenance (which you’ll find in the owner’s manual) is performed. Reed notes that required maintenance is not the same as dealer-recommended maintenance, which will cost a good deal more. And the first three years of new-car ownership should be relatively inexpensive.

“If you are nursing along an older used car, it is essential to keep all the fluids up to the right level,” Reed said in an email. “Having enough oil in a car’s engine is the No. 1 thing to keep it running (except for putting gas in the tank). Beyond that, having good tires is a huge safety factor.” It’s also important to monitor the battery, he said.

Once your car has outlasted the payments, perhaps you can use the money that would have otherwise gone for payments to save up for your next vehicle — or to keep a needed repair from being a budget-buster.

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