Buying a car is a big investment, so it’s important to be sure that you choose a vehicle you can afford while enjoying a safe and reliable means of transportation.
If you’re wondering how to buy your first car, there is no shortage of helpful information out there to guide you along the way.
Read on to cut through the confusion and discover some tips to guide you when you’re ready to buy your first vehicle.
Figure Out How Much You Want to (or Have) to Spend
The first step in making any major purchase is to determine just how much money you have to spend. Once you come up with a figure, remember to stick to this number and don’t go above it. If you can find a car for less, you’ll be even better off.
To determine how much money you can (or should) spend on your new car, start by determining what your monthly income is. Make sure that you include all income from your regular job, side hustle, and any self-employed income, too.
Next, you’ll need to tally up your fixed living expenses. These are costs that do not change like your rent, credit card or loan payments, cable bill, and other utilities. Add variable expenses like food, clothing, and emergency savings.
Once you have your income and expenses on paper, determine the cost of ownership for your car. This term refers to the cost of your auto insurance, maintenance costs, and any local or state registration costs.
If you’re planning to trade in an old vehicle, include this amount when figuring out the total cost of your new car. Just be sure that you’re estimating the current fair market value, and that the current car is paid off. If not, you may need to roll some of this debt into your new loan.
Subtract your fixed and variable living costs and the vehicle cost of ownership costs from your income after taxes. The new monthly car loan payment should be less than this amount, which will be what you can afford to pay for a new vehicle.
How to Buy Your First Car: The Loan
Now that you have a good idea of what type of budget you’re working with, it’s time to shop for a car loan. There are two basic sources to find these types of loans: a direct lender and through the car dealership.
A direct lender refers to a credit union, bank, or another type of financial services provider that can help you get a car loan directly from them. In most cases, direct lenders have better rates and terms than dealerships (but not always).
Keep in mind that direct lenders won’t guarantee their rate until you sign a loan agreement. However, most can give you preapproval for the loan that you can take with you to the dealership. Use this information to negotiate and see if you can get better financing from the dealer if possible.
Another way to find a great deal on a car loan is to compare rates online. You can go to https://www.plenti.com.au/car-loans/compare/ and compare rates from several lenders side-by-side.
Car dealerships offer in-house financing to help them get sales, but they don’t always have the best rates to offer. If you choose this route, you’ll enter a direct agreement with the lender rather than a bank or credit union.
However, many car dealerships offer special incentives and discounts to buyers who finance through them. Make sure you look at all of your options carefully so you’re sure that you’re getting the absolute best deal for your budget.
The Fun Part: Finding the Perfect Car
Your budget is in place, you know where you want to get a loan, and now it’s time to start car shopping. Before you begin, make sure that you know the type of car you want. Perhaps it’s a four-door sedan, an SUV, a minivan, or a sleek sports car.
Make a list of the makes and models you’re interested in the most. If you’re more concerned about the general style, simply jot down the body type (sedan, van, truck, etc.) so you only look at vehicles you know you’ll want to drive.
New cars tend to have fewer issues, but there are plenty of excellent used vehicles available, too. Used cars tend to cost less but you may have to make more repairs or own a car with a shorter lifespan if the car is many years old.
Start your quest by scouring the Internet and comparing prices online. Many dealerships now offer their inventory on their website for buyers to peruse before they come in and do a test drive.
Another good source for cars is through your local online classifieds. Many people are looking to sell their current vehicles, and you may end up with a pretty amazing deal.
If you decide to buy a used car, make sure that you have it inspected by a separate, private mechanic. Dealerships that object to this option should raise a red flag and you may want to consider shopping elsewhere.
A reliable mechanic should be able to tell you if the used vehicle has been in a prior accident or suffered any other type of damage. They should also be able to identify major problems or even potential problems so you can make a smarter decision about your purchase.
Always get the service record of used vehicles from the seller. These records give you a detailed history of the car’s problems, or they may simply show that the owner has taken good care of it with regular preventative maintenance.
Buying a car is somewhat similar to buying a home in that you’re always free to negotiate the price with the seller. If you’re visiting a dealership, try to haggle the price down to a lower one that you’ll be happy with.
If the dealership can’t (or won’t) lower the price tag, you can always ask them to offer a lower interest rate on their in-house financing loan terms. Look up the wholesale prices of a few cars you want, and use them as a negotiating tool. You can also use your preapproval from direct lenders to try and get better terms.
Longer car loan terms should give you lower payments, but you will pay more in interest over the life of the loan. Short-term loans have higher payments, but you’ll pay less in interest so it really depends on which is more important or feasible to you.
When negotiating with a private seller, simply ask them what their lowest price is. Some people might need to move and can’t take their car with them so they could be willing to go lower than the price they had advertised.
After you’ve come to an agreement on price, it’s time to work on finalizing the sales contract. Read all of the terms carefully including the fine print before you sign on the dotted line.
If you’re financing the car, make sure that there are no hidden fees. You should also check the repayment schedule and interest rate to confirm that they are fixed and won’t change over the life of the loan.
If you’re wondering how to buy your first car at the right time, the last few months of the year tend to be best. This is when dealerships are getting ready to bring in the new year models and want to clear out remaining inventory.
Another great time to shop is near the end of the month. Many salespeople want to meet their sales quota, and they tend to be ready to make better deals just to get this quote in on time.
One good car buying negotiating tip: offer around 20% lower than the asking price, then haggle from there. In many cases, you could walk away with around a 10% discount when all is said and done.
Now you’ve found the perfect car at a great price with great financing terms. Congratulations! It’s time to title and register your car so you can legally drive it.
The vehicle title is a piece of paper that shows your name and address so that it’s legally registered to you. Most dealerships will give you temporary tags or license plates until your permanent ones arrive. Some states require the dealership to file a title and registration application on the spot and give you the permanent plates before you drive away.
When purchasing used vehicles from a private seller, make sure that you have a title transfer done right away. You can do this at most government offices like the Department of Motor Vehicles. Other areas may require you to title and register your car with the county tax office or the Secretary of State.
Make sure that you have the title and registration squared away before you drive your new car. If you get pulled over, you’ll need to be able to prove that the car now belongs to you.
Some states require the buyer and seller to sign the title transfer at the same time, so you may need to go to one of these offices together to complete the sale. No vehicle can be registered without car insurance, so add that to your list of things to do, too. Proof of insurance is required by most government offices before a vehicle can be registered in your name.
Car Insurance Tips
Aside from gas, repairs, and maintenance, car insurance is another cost of ownership associated with having a car. Shop around to find the best insurance rates so you’re paying the least amount every month while getting the best amount of coverage.
If you’ve been driving for a while and have a good record, you should get a decent insurance rate on your new car. Things like security systems and even your zip code can also play a role in what your rates will be.
College students and members of the military may qualify for an automobile insurance discount. Make sure you ask the insurance company what types of discounts are available so you can save even more.
Another factor that determines your rates is how far and how often you drive. If you only drive a few miles every day, your rates might be lower than someone who has a very long daily commute.
Enjoy Your New Car
Your budget is set, your loan is secured, you’ve negotiated the best deal, and your paperwork is all ready to go. Now you can finally relax and enjoy driving your brand-new car!
Remember that owning a car is a responsibility, so it’s important to take good care of it. Start by scheduling regular preventative maintenance visits to your mechanic. Regular oil changes and tune-ups will extend the life of your car.
When you take good care of your new car, it will take good care of you. Protect your vehicle by storing it in a garage whenever possible, and always ensure that the tires are properly inflated and your engine is working the way it should be.
You can pay your vehicle off faster if you have the extra money, which will shorten the life of your loan. The sooner you can pay it off, the sooner your car will be completely yours without the worry of a car payment. If you follow a few simple maintenance tips and pay your car payments on time each month, you should enjoy your new vehicle for many years to come.
Car Shopping Made Easy
Use these tips when you think about how to buy your first car so that you find something within your budget and in a style that you’ll love. Always negotiate and shop around to get the best deal in terms of the price and the loan terms so your car is affordable and enjoyable to drive.
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