Purchasing a car can be a thrilling yet daunting experience, especially for first-time buyers, as it can be overwhelming to consider factors such as safety ratings, engine type, and other standard quality measures. Moreover, there are still practical considerations like budget, current market, and personal preferences to evaluate. Like many financial investments, making the best investment decision requires proper research and preparation. As such, this article offers in-depth tips for buying your first car while getting the best available vehicle from the dealership at an affordable price.
Tips for buying your first car
The following are some tips to guide you in purchasing your first car:
Create a budget
Creating a budget keeps you from emotionally investing in a car above your financial means. First, calculate your monthly spending and income to set a budget, classifying them into discretionary and fixed costs. After a proper financial analysis, identifying where to reduce expenses becomes easy, allowing you to free up more money for your car purchase. Then, you may focus on buying a car within your financial capacity.
Experts suggest that limiting your monthly car payment to a maximum of 10% of your monthly income is the best way to go. Remember to take other car-related expenses such as fuel, insurance, maintenance and repairs when budgeting to have the correct figure. Finally, loan terms are also a significant consideration when creating a budget. With auto loans ranging from 36 to 84 months, choosing a longer repayment duration results in a cheaper monthly plan but a higher overall loan interest. Meanwhile, you may also pay a substantial down payment on an expensive car to save money on interest rates in the long run.
Research
Once you’ve determined your budget, conduct adequate research to identify the cars that meet your requirements within your price range. Browsing online at nearby dealerships’ websites or automobile platforms like Edmunds.com, Autotrader or Kelley Blue Book can give you a general sense of your expected prices. During your research, you may encounter attractive car lease deals that are hard to refuse.
While some drivers may prefer outright ownership of their vehicles, leasing offers numerous benefits. Leasing a car involves a lower down payment and subsequent monthly payment, allowing you to get a brand-new car. On the other hand, you might not be comfortable with the restrictions that come with leasing. Ultimately, the decision to lease or buy depends on your priorities and circumstances.
Determine how to fund your car purchase
After making a list of cars that fall within your financial means, the next step is determining how to fund your car purchase. If you have enough cash and are willing to make a one-time purchase, please do so. It saves you from paying loan interest. If not, your only alternative is to apply for an auto loan to finance your purchase. First-time car buyers can apply for auto loan finance from financial institutions like credit unions and banks or apply directly from an auto dealership.
The drawback with applying through a dealership is the additional loan processing fee charged on auto loans. As such, car buyers prefer using financial institutions to get better loan terms. Sourcing pre-approved auto loans from these financial institutions also gives you leverage when negotiating with car dealers to see if they can match the loan term. An excellent way to get the best loan term is by applying to multiple lenders simultaneously. Ensure you apply within a specific duration. Applying to multiple lenders within a 14- to 45-day period protects you from being unfairly penalized for shopping around for the best loan deal.
Save enough for a down payment
Like buying a home, most auto loan lenders prefer borrowers to remit a minimum down payment of 20% of the car value. A minimum down payment of 10% is enough when purchasing a used car. Several benefits come with making a 20% down payment. Rhe larger your down payment, the lesser the loan amount required. A substantial down payment also secures better loan terms that help you save money in the long run.
Numerous automakers, dealerships and automotive websites offer online payment calculators that enable you to determine the most suitable down payment for your car. These calculators allow you to input different car prices and loan terms to estimate how varying down payment amounts could influence your monthly payment and the total interest to pay.
A new car or used
For budget-conscious first-time car buyers, purchasing a used car is reasonable. Choosing a used car is often the more favourable option for individuals buying their first car on a limited budget. Cars under five years typically offer many of the same safety features and technological features as newer models but at a significantly reduced price. If a five-year-old car is too outdated, consider seeking dealerships selling two- to three-year-olds.
Generally, an automobile dealership or private sellers are the two options for buying used or certified pre-own cars. “Certified pre-owned” (CPO) refers to previously owned vehicles that have passed extensive inspections and reconditioning procedures. These cars frequently come with limited warranties and additional perks. Before purchasing a CPO car, thoroughly understand the warranty coverage.
Choose a car model
There are generally four main types of cars: saloons, hatchbacks, SUVs, and estates. While other types exist, such as sports cars and people carriers, most vehicles fall within these categories. SUVs and estates are popular for families due to their spaciousness, but smaller cars are more suitable for new drivers since they don’t necessarily need so much space.
Many individuals choose a hatchback as their first car due to their compact size, affordability, and efficiency. Besides this, hatchbacks can accommodate five passengers and offer ample cargo space.
Get a car insurance
Avoid shopping for car insurance while you’re test-driving vehicles! It’s essential to have decent knowledge about insurance and have a policy in place before you purchase a car. As you consider different cars, you can also check their insurance group, which ranges from 1-50, with one being the least expensive. Cars in lower insurance groups tend to have lower insurance costs.
Several factors can affect the cost of car insurance, such as the driver’s age, occupation and location. For example, young drivers usually pay more than older ones. Although insurance can seem expensive, if you shop around and get quotes from multiple companies, you might get discounts that apply to you, such as student discounts or other available discounts.
Carry out proper car inspection
Whether you’re purchasing a used car from a dealership or a known individual, it’s crucial to have a reliable mechanic conduct a pre-purchase inspection. Most auto repair shops provide this service, which involves a comprehensive vehicle examination. Though it may cost a few hundred dollars, it’s well-spent as it prevents you from buying a car with severe underlying mechanical problems. Despite the rigorous inspection process that certified pre-owned (CPO) cars undergo, have an independent mechanic inspect the vehicle before purchase.
CPO inspections generally concentrate on significant systems and observable problems, while independent mechanics can identify minor issues, inadequately finished repairs and possible future concerns. If the dealership has inspected the car, obtain a written inspection report to present to your mechanic. When searching for a mechanic to conduct a pre-purchase inspection, you can browse online review sites for top-rated mechanics nearby or ask for recommendations from friends and family. Consider it a warning sign if the seller expresses concerns about an independent inspection.
Test drive
A test drive is crucial to ensure that the car you’re considering meets your needs and preferences. Test driving allows you to evaluate the comfort and space of the interior, as well as the car’s ride quality, steering responsiveness, braking, acceleration, noise level and visibility.
When test-driving a used car, ensure the engine starts without delay and runs smoothly without disturbing sounds. Check if the suspension system provides a quiet and comfortable ride, even on uneven roads. There may be underlying problems with the vehicle’s undercarriage if you hear cracking or groaning noises or experience any twitching or bouncing. Examine the car’s air conditioning system to ensure it’s functional.
Negotiate the price
Bargaining over the price is typical whether you’re purchasing a car from a dealership or a private seller. Used cars offer more room for negotiation since they lack a set manufacturer’s suggested retail price (MSRP). Even with a new car, you can often negotiate a substantial reduction from the sticker price. To negotiate effectively, research several automotive websites to determine the car’s value while considering additional features.
After arriving at an average price estimate, reduce the figure by about 15% and make the seller an offer. You get more bargaining power if you’re pre-approved for a loan or paying in cash. Avoid spending money on extras that add little or no value to the car and only increase the price. Be bold in negotiating the price and take advantage of the right timing to secure a significant discount. Dealerships have sales targets, so shopping at the end of a quarter or sales month may result in more flexible negotiations.
Carefully go through the contract
When you receive a contract, you may be eager to sign it out of excitement without thoroughly reviewing it. Dishonest car dealers may take advantage of this and add charges or alter the terms you previously discussed without your knowledge or consent. After signing a contract with a seller, you agree to a legal commitment, and it may be challenging or impossible to amend the conditions. Carefully read the agreement or get guidance from a dependable friend or counselor. Also, ask questions if the terms are unclear.
