How to Buy Your First Car
Cars might be expensive, but they're a necessity for most people. Whether your hand-me-down car has kicked the bucket or you're moving to a new city without public transportation, you may dread having to buy your first car. Buying a car can be a frustrating process, but it doesn't have to be. This article walks you through the car buying process by covering the following topics:
- Determine your price range
- Decide which car features you need and want
- Get a car loan
- Find the car
- Negotiate the price
Determine Your Price Range
When you're buying your first car, remember that the vehicle isn't your only expense. Gas, insurance, and regular upkeep can be costly, and you also have to pay for the license plate, title, loan interest and sales tax. Cars break, so you can't just cross your fingers and hope nothing goes wrong. Instead, plan a reasonable budget by calculating the amount of your paycheck that's spent on rent, utilities and other permanent bills like student loans. Figure out how much you spend on groceries and going out with friends. Estimate your gas prices and car maintenance costs, and the remaining amount is the most you can reasonably spend on a car loan. Check out WhatCollegeForgot.com's guide to budgeting for more information.
Several websites such as cars.com and Edmunds.com offer true cost of ownership calculators to help you determine estimated payments for various car makes and models. These calculators take many factors into account – down payments, interest rates, sales tax and the amount of your vehicle trade-in. Whether you're buying used or new cars, you'll find realistic payment information to help you determine what cars are available in various price ranges.
Consider leasing a car as you’re determining your price range. When you buy a car, you pay for the entire cost of the vehicle. A leased car costs less because you only pay the difference between the vehicle’s current cost and its value when you trade it in. Leasing can be advantageous in certain situations; talk to a banker about your options.
Decide which car features you need and want
You should know what you want and need in a car before you begin looking at vehicles. Make a list of the features you require, the ones you want, and the ones you could do without. Consider the following:
- Power steering
- Anti-Lock brakes (ABS)
- Four-wheel drive
- Air conditioning
- Power windows
- Heated seats
- Side airbags
- Roadside assistance
- GPS navigation system
- Stereo
- Remote keyless entry
- DVD players with headsets
- Roominess and seating
- Storage compartments
- Cup holders
- Sync technology such voice-activated music, phone, and directions
- Cruise Control
You should also check into gas mileage. Research gas mileage information online to find cars that get enough miles per gallon to keep you happy.
Get a car loan
Most people need a loan to purchase a new car. Credit unions and banks typically offer better interest rates than car dealers, so talk to your banker first. Your credit score affects your ability to get a loan –check your credit report and revise any mistakes at least a few weeks before visiting the bank. As a last resort, you can discuss financing with a car dealer, but know that you’ll likely have higher interest costs!
Most loans require a down payment, which is a lump sum you pay up front to secure the loan. Your interest rate depends on several factors including your credit history, loan terms, and down payment amount. Pay as much as you can up front to get the best possible interest rate and lower your monthly payments. Try to negotiate the interest rate with your loan officer or financer. You might secure a lower interest rate if your monthly payments are deducted automatically from your checking account. A shorter loan term could also improve your interest rate.
Your car loan should be no longer than 60 months – or five years. Secure a fixed-interest loan, and verify that you won’t be assessed a penalty if you pay off your loan early.
Find the car
There are lots of ways to find and buy the right vehicle for you:
- Internet – Use the internet to find cars for sale, and compare prices on cars.com, Edmunds.com, and eBay.com. Select the make and model of the car you want, and then adjust your search based on the car’s distance from you, mileage, price range, and even the vehicle's color. This is the best way to begin your car search – you’ll learn what types of cars are in your price range.
- Newspapers – Newspapers might list some of the cars use see online, but there will likely be some cars that are only listed in the newspaper's classified sections. Used cars listed in the newspapers are sometimes less expensive than similar ones for sale online or at a dealership. Look for the cars you’ve saved in your internet search – you might find one or two similar options that are local bargains!
- Car dealerships – Visit several car dealerships, and take a look at their inventory. Visit on a Sunday if you don't like being hassled by salespeople, as some dealerships are closed on Sundays. This is a good time to see what's available and look at the prices on your own terms.
- Friends or family members – It's okay to buy a car from a friend or family member, and it's often a great way to get a good deal. Just make sure you create a contract that both parties agree to and sign.
Before buying a car from any of these sources, ask a trusted a mechanic to look at it. Visit CARFAX.com and type in the VIN number to obtain a used car's history, including prior owners and accidents. Cars don't have a return policy – do your research before you buy.
Negotiate the price
Always negotiate the price, regardless of how you're buying your first car. First, find the car’s standard retail price. Compare costs online and with multiple dealers. Talk to several car dealers about the value of your trade-in, if you have one.
Approach a car dealer with the total you're willing to pay or the amount the bank has agreed to loan you. It's best to set expectations first rather than ask the dealers how much they can lower the listed price. Don't take anything less than what your old car is worth, and don't overpay for the car you're buying new. Don't be afraid to walk away and look elsewhere.
Don't expect to buy a car on the first day of your car search and get the best price. Do your research, know what you want, and be ready to negotiate the price. Most importantly, remember that you make the calls when buying a car.
By: Robin Degner
7-23-2009
Robin Degner is a writer for several publications including the Goshen News. She lives in the midwest with her puppy and travels as often as possible. She can be reached via email at robindegner@gmail.com.
