How to buy your first car
Buying your first car is an exciting endeavor, you will finally be able to enjoy your freedom, get to work faster and/or take road trips! However, before you go too far down that road it’s important to plan your purchase wisely. Budgeting and thinking things through for your first car will lead to a smoother time dealing with the unforeseen costs that come with your new vehicle.
- Decide if you need a car
How beneficial is a car to you? Will it be your primary way to get to work, or will you mostly be using it for running errands and taking trips? If you think you may not use your car every day, it may be easier to use a ride share company like uber or lyft to get where you need to go. Another option may be to use a car-sharing company like zipcar for longer trips or errands, or if you just prefer to drive yourself. If you feel you really do need a car, be honest to yourself about what you need. Assess your lifestyle, the driving conditions you’ll encounter most often, and the number of people in your household. An SUV for a two person home doesn’t make much sense, just as a sports car for a family of 6 probably won’t fit your needs.
Do your research
Figure out how much you can afford per month, how much you have right now and how much the average price of gas is in your area. Also, figure out how much you are willing to spend on insurance, maintenance, and repair costs. You can use this calculator to determine your base price range. Make sure you know your credit score before going to the dealership. Your credit score will determine the interest rate you’ll pay on your car loan. You can get your credit score here for free. Shop around at multiple car dealerships before jumping into the first car you see.
New or Used
New cars depreciate in value almost immediately when you drive them off the lot. Used cars may have underlying issues that you may not factor into your budget initially. Some car makers offer free maintenance for new cars a certain number of years after purchase. However, you will be paying a lot more upfront for the same model of a new car versus buying a used version. Manufacturers may also offer special financing incentives or lease deals for new cars that aren’t offered in preowned models. If you decide to buy a used vehicle, you’ll want to get a vehicle history report to see if the car has been in any major accidents, or has any issues such as fire or flood damage. Weigh your options before deciding on your choice.
Find your financing
If you don’t have cash for your next car purchase, you’ll need to borrow the money from somewhere. Most likely you’ll be securing a loan through a commercial lender, but there are other options. Dealerships may offer incentives for securing a lending option through them, which may end up saving you money in the long-run. Shopping around for pre-arranged lending provides reference when you are offered dealer arranged lending and will help you negotiate the best purchase price. If you do qualify for financing with the dealer, you can use this as a second opportunity to negotiate price. For example: Let’s say you settled on the price of the car to be $13,000. And they offer you financing that comes out to $300 a month. You can tell them that that monthly payment was higher than you’d like, and you were looking to spend no more than $275 a month. This might lead the dealer to offer you a better price on the vehicle to get you to that monthly payment amount.
Some things you should keep in mind are: Unless it’s absolutely necessary to get a car, it may pay to wait until your finances are in order. If you do decide to buy a car, always pay for the taxes, fees, and extras with cash. Keep your loan term as short as possible, to avoid paying more interest than you need to. In addition, always remember to shop around and compare insurance quotes. Once you take these steps, you should be well on your way to buying your first car! Enjoy the ride.