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January 4, 2022
Few purchases are quite as exciting as your first car. Most of us dreamed of that magical day when we would turn 16 and could legally get out on the road. Whether you are shopping for your first car as a teen or not until later, being a first-time car buyer is both exhilarating and stressful.
If you’ve never owned a car before or are helping someone else through the process, here are a few things to consider as a first-time car buyer before making the big purchase.
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When determining a realistic budget for your vehicle, you must consider the monthly payment you can afford and the total cost of ownership. There are many aspects that affect the total cost of owning a car on top of the price you pay at the dealership. The biggest factors are:
After you’ve figured out what monthly payment you can afford, you’re still going to need to come up with about 20% for a down payment. While it is possible to get a loan with no money down, as a first-time car buyer without a credit history, lenders will likely require one. The bigger the down payment, the smaller the loan you will need, and the less interest you will pay in the long run. Some tips to help save for a down payment include:
You can even get started on research before getting your license. Most dealerships now list their inventory online, and you can research everything from the comfort of home. There are literally hundreds of car buying websites (including the one you’re on) that let you research car deals, safety ratings, the total cost of ownership, residual values, you name it. Use your research to uncover:
There’s nothing wrong with buying a used car! You could even buy an auctioned car from the dealership or a beater car, and for many new car owners, a used car makes the most sense. Did you know that new cars typically depreciate 20% the moment you drive off the lot? If you’ve been saving money for a $22,000 car, that immediate $4,400 loss can hurt! To ensure you buy a quality used vehicle:
A common mistake for first-time car buyers is to fall in love with a particular model or trim. If you are looking for a very specific model used car, you will limit your options and likely end up spending too much. Instead, think about a class of car like a sedan, SUV, or truck and keep your options open. Consider which vehicle type is best for your needs.
For example, if you have a long commute or plan to make a lot of road trips, safety ratings and MPG will be critical factors to consider. Used car websites will provide significantly more results for every budget if you search by type of vehicle.
Before the Internet, you were stuck with whatever cars were in stock at your local used car dealership. Now you can get prices from multiple dealers at once and drive down the car price. Start your search for a vehicle online, checking dealerships in your area or around the country. Check on used car sites as well and other private marketplaces for cars being sold by the owner. Even if you do not complete your purchase online, it’s an excellent place to begin your search and complete your research so you can make an informed decision.
Another trap is to only search for cars in your zip code. But why limit yourself? You could find great deals by expanding your search to a much larger radius. The wider your search radius, the more likely you will find vehicles that meet your criteria. You could always buy a car out of state and even get a car shipped if need be. But consider taking a road trip if the price is right.
After you’ve found a used car, you’ll want to ask some questions and get a pre-purchase inspection. While you can examine the car yourself, it’s best to trust the trained eye of a mechanic. Pre-sale inspections typically cost a couple of hundred dollars, but they are worth every penny if they prevent you from buying a lemon.
Whether this is your first car or your 5th, make sure you negotiate the best price. Negotiating may seem intimidating as a first-time car buyer, but it’s vital to ensure you get the best possible deal. Learn the ins and outs of negotiating the best car price here.
Car leases can be great if you want to drive a new car every three years, but a lifetime of leases will cost you tens of thousands of dollars more than buying and owning. If you want to start building wealth, consider buying and holding cars for as long as possible.
But if this is your only option, make sure to research the best time to lease a car.
How do you get a loan with little or no credit history? This is probably your biggest challenge. Some dealerships or banks will work with people with little history or bad credit, but you can expect to pay high rates. If you’re considering buying a car in the next few years, start building your credit now with a credit card, and make sure to pay on time consistently.
However, if the time to buy a car is now and you don’t have the cash to buy a car outright, your best bet may be to get a co-signer for your auto loan. This is a great option if you have a parent or relative willing to vouch for your creditworthiness. In the long run, it can also help you build credit if you make your payments on time. Keep in mind though that if you miss payments, you not only damage your own credit but the co-signers as well.
Determine the total cost of ownership before deciding if you can afford a new vehicle. Create a budget that includes all your costs and strongly consider buying used. Whether you decide on a new car or a used car, make sure you get online car quotes and negotiate with multiple dealers over email.
By following the steps above, you’ll be able to get a vehicle that meets your needs and your budget. Then, it’s time to enjoy your freedom on the road! Although it should go without saying, please remember to always wear a seatbelt and don’t drink and drive.
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