Christmas is fast approaching and nervous retailers are reporting the weakest sales figures in 35 years. Auto sales in November were at their lowest rate since 1982. That said, consumers, who haven’t gotten themselves in over their head in debt, lost their jobs, or otherwise suffered from recent economic bad times may wonder if it is a good time to spend. Auto companies are offering rare opportunities for low or no interest debt to entice buyers, and retailers are offering deep discounts to clear inventory. Here are some things to consider before jumping on board?
- Can you really Afford it?
- Is it worth the price tag?
- Will the Terms Change?
Can you really Afford it?
Lenders are right now offering very low rates, often for the life of the loan. Still you have to make sure that you can really afford the extra monthly payment in an economy where food prices are still high, and while gas prices are low right now, it may not be the time to buy a Hummer. Inflation is still high and undertaking a large new bill could be taking away from cost of living expenses in years to come. It is important to consider where to put the extra cash if you are fortunate enough to have extra. Low interest rates, and enticing terms may make important purchases more affordable, and tough times for retailers mean lower prices as well. It could be a great time to put on that new addition, upgrade your appliances or buy a new car.
Is it worth the price tag?
A deal isn’t a deal if the product isn’t worth the price tag. There are places to invest in your home where you will always get a return on your investment. Upgrading your kitchen with granite counter tops, new cabinets and stainless steel appliances are always a smart buy, provided you don’t over improve your home for the neighborhood. Research the marketplace on the Internet, or check with a local real estate professional. Spending for a home improvement that will overprice your home for the location is a bad investment. Automobiles are always a bad investment, but for most of us they are a necessity. Compare prices and interest rates. You may be able to get a great deal on a “new” 2008 model, but you must remember that the vehicle is a year older than a “new” 2009 model, so at trade in time it will be worth less, no matter how many miles it has been driven.
Will the Terms Change?
You must also consider the terms on the loan. If it’s an introductory rate, then it is important to consider if you will be able to afford the payments after it changes. You will also want to consider if the lender has provisions to change the terms if you are late on a payment. Always read the fine print, and always make sure you can afford any debt you take on.
Irresponsibility caused the recent financial crisis. Some of that was irresponsible consumers, some was irresponsible bankers, some was irresponsible government overseers. In bad economic times it is vital to make smart choices with money. Using good judgment is always a smart policy.