Buying your first car? A few smart decisions can help you save a huge amount of money. Here are a few important tips for buying the first car. For many, cars are their second biggest dream after a house. We have put together car buying tips and tricks to navigate the process of buying and selling your next new car. Also, you will learn how to find the best deal, whether you should buy a used, new, or a “certified pre-owned”, how to ensure for less, how to sell your old car, and much more. So, let us start.
Tips for Buying the First Car
Fix a budget- The most important first-time car buying tips is to fix a budget. This will help you to narrow down your focus to cars within your cost before you fall in love with a car that you cannot afford. To fix a budget, start adding up all your monthly income and expenses. Make sure you categorize your expenses as either discretionary or fixed. Once you have got an idea of your expenses, you are likely to see various areas where you could cut back, which could save you more money to put towards your monthly car payment.
Generally, it is better to keep your car payment less than 10% of your take-home pay. But your monthly salary is not the only factor to consider while fixing a budget for your car. You must also consider the ongoing expenses of owning a car, like gas, insurance, maintenance, and repairs.
Loan terms are another important factor that should be considered while buying a car for the first time. Usually, auto loan terms range from 36 to 84 months. The longer the loan term, the smaller your monthly payment will be, but the more amount you will pay in interest with time. By selecting a less expensive car and putting down a huge down payment, you can choose a shorter loan term and at the same time manage your payments.
Do your research- One of the most vital tips for buying the first car is research. Before you finalize a car, make sure you do thorough research. Once you get an idea of your budget, do some research to find out which cars are in your price range. Researching online by visiting the websites of car dealers or visiting automotive sites will give you an idea of the price that you need to pay.
While doing the research, you will certainly be tempted by great deals on car leases. Several drivers may prefer to own their car straight away, but there are a lot of benefits to leasing one. After all, you will get a brand-new car, for a low-down payment and monthly payment versus purchasing. But limitations can be restrictive, and you may balk at putting money into a car you will finally have to return. Eventually, it is a decision that is based on your personal needs and preferences.
Explore your purchasing and financing options- Once you have narrowed down the car list, next you must think about how you will arrange the money. Until and unless you have saved enough money to purchase a car straight away with money, you will require an auto loan to finance the buying. As per the Experian’s State of the Automotive Finance Market from the 4th quarter of 2019, about 84.6% of new vehicles and 54.6% of used cars were funded.
You can arrange finance through an auto dealership or a third-party like credit or bank union. However, as auto dealers will attach additional fees for managing the loan, you can often get better terms from a credit or bank union. Getting pre-approved for a loan through a third-party lender can provide you with negotiating power to check if the dealer will match the loan terms or not.
If you are applying to several lenders to get the best loan, make sure to apply to all of them within a short time. Applications made within a period of 14 to 45 days will count as one inquiry in your credit score. Once it is approved, the lender will give proof of the loan terms and the amount to reveal the dealership.
When it’s time to purchase, your options for where and how to do it are more than ever before. Based on whether you are planning to buy a used or new car, you can buy from car dealers, dealership websites, online car buying sites, and private sellers. Some companies even deliver the car to your doorstep.
Save money for the down payment- Another one in the list of car buying tips and tricks is down payment. How big does the down payment of a car need to be? Just like buying a home, most lenders like to see a down payment that is at least 20% of the car’s actual price. There are many reasons why a 20% down payment is right:
- New cars usually lose a part of their value in the initial year of ownership, so a down payment of 20% helps ensure you never owe more than what your car is worth.
- The larger the down payment, the smaller the loan you will require.
- A bigger down payment usually earns you more favorable loan terms, which saves you money in the future.
Many dealers, automotive, and automaker websites have online payment calculators that you can use to get the best down payment amount. By putting in different loan terms and car prices, you can assess how different down payment amounts might affect the monthly payment and the amount of interest you will finally pay.
Consider used cars- Are you planning to buy a new shiny car? You might have a second thought when you find out how much that new car will cost you. Purchasing a used car is often a great option for first-time car buyers. Cars that are less than five years typically have many of the similar safety features and technological whistles and bells new models do but at a lower cost. If a five-year-old car is too old for you, start looking for car dealers who sell two- to three-year-old cars that are being offered in leases.
You can purchase used cars from auto dealerships or from private sellers too. Many car manufacturers and car dealers sell “certified pre-owned” cars. These are the used cars that have undergone a thorough inspection and reconditioning. Often, they come with limited warranties and other additional things. While buying a CPO car, ensure that you understand whether the vehicle is covered by a warranty and if it is, what it covers.
Go through the contract carefully- Another one in the list of tips for buying the first car is read the contract carefully. Purchasing a car can be a lengthy and stressful procedure. By the time you get the contract, you are hopefully eager to start driving. Once you sign a contract, you enter into a legal agreement with the seller- and once you sign over the dotted line, it is often hard or impossible to go back on.
Enjoy driving your new car- Congratulations! You own a car now. Purchasing your first car may be the first big purchase you ever make. There are a lot of things to consider, but following the above-mentioned car buying tips and tricks will help you to ease the stress. With careful budgeting, planning, and research, you will gain the confidence to negotiate the best deal and get your favorite car without much fuss.