7 Tips for Smart Big-Ticket Purchases

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7 Tips for Smart Big-Ticket Purchases
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7 Tips for Smart Big-Ticket Purchases

If you are paying cash or need a loan, find out before you start shopping how much you can afford to spend by getting prequalified for your financing. If you end up using a credit card, make sure you're using it in the smart way: Save up the money you need to pay off the balance to avoid paying interest -- which increases the real price of the item -- ASAP. If you must carry a balance, use the card in your wallet with the lowest interest rate. And don't automatically apply for a store card just to get a discount (or other perk like free delivery) if there's a chance it may take you longer than you anticipate to pay off the balance.

For example, interest rates on a Home Depot (HD) credit card range from 17.99 to 26.99 percent, while the average interest rate for all variable-rate credit cards is 14.59 percent. If you charge a $30,000 kitchen remodel at 14.59 percent, and commit to sending your credit card company $600 a month for the life of the loan, you'll end up paying nearly $17,000 in interest -- and it'll take you 6.5 years for your balance to reach $0. If you use a credit card with 17.99 percent interest and the same $600 monthly payment, it will take you almost 8 years to pay off that kitchen and set you back a whopping $26,000 in interest. (Yes, that's $9,000 more.)

Once you know what you can afford, figure out what features you want -- and how much they cost -- in advance. Read reviews of computers and hotels, study neighborhood profiles, visit stores and websites so you are not snowed into buying more than you need by an energetic  salesperson. For example, while a video editing program like Cyberlink Power Director 10 may seem like a cool thing to have on your new computer, you might be just as happy with the free Windows Live Movie Maker software -- happier, in fact, because you don't have to spend an extra $130 for it.

Don't rush into any big purchase -- moving too fast is how the biggest mistakes are made. Revisit your list of desired features and really assess whether they meet your actual needs, or whether you're just trying to keep up with the proverbial Joneses.

There's nothing like hands-on experience to get a sense of what you need. So, when possible, test-drive your potential purchase to see if reality matches your expectations. For example, look in person at the kitchen counters and cabinets you are considering; spend time in the neighborhood where you want to buy during the day, in the evening, and on weekends; try out different computer models and decide which functions are most important for the way you'll use it.

And, before you make reservations for an expensive vacation, think deliberately about what's most important to you in a destination -- for example, a sophisticated hotel or quick access to public transportation.

A lot of knowledge is a good thing when you're buying a big-ticket item. Compare prices online for laptops, hotel rooms, airfare or for homes in the neighborhood where you want to live so you have an idea of what's available, what's a bargain, and what's a ripoff. Set up price alerts with Kayak.com for hotel rooms and flights or try FreePriceAlerts.com on other items.

Your bargaining power is highest when sellers most want to sell -- at the end of the quarter, in a slow season (between Christmas and New Year's), or when new inventory is about to arrive. Websites like PriceGrabber.com and Decide.com can help you figure out when to buy.

In the excitement of finally making that big purchase, you should be alert to the possibility of last-minute expenses that can trip you up. A salesperson is likely to encourage you to buy an extended warranty that could cost hundreds of extra dollars and may not be necessary. If you're buying a home, failing to have a home inspection -- or ignoring potential problems the home inspector finds -- could cost you thousands in repair bills down the road.

Have your cash easily accessible for a down payment, your financing in place, and your upper limits firmly in mind -- and then, be prepared to be flexible on other things. For example, on a home purchase, the seller may need to rent back the home from you temporarily, to get the logistics of their move to work. Doing home renovations? Maybe you'd be better off waiting to installing the recessed lighting until after you pay off your cabinets and countertops.

Doing due diligence not only helps you identify exactly what you want (and what you don't), it also enables you to truly enjoy your big-ticket purchase because you know that in the end you paid a fair price.

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