Whether you’re a new graduate looking for your first real job or someone who isn’t the stereotypical first time car buyer, the car-buying process is never as stressful as it is the first time.
But, no matter how much we love our high school hand-me-down or hoverboard, it’s necessary to let go at some point. It’s not easy to be a good first-time vehicle buyer, but if something is worth doing — and it is — it’s worth doing well.
Keep on reading for our full breakdown of everything you need to know about car ownership and getting your first car with no regrets.
For the First Time Car Buyer: Know Your Spending Limits
Setting a budget is the first step in purchasing a vehicle. Whenever you fall in love with a vehicle that will break the bank, this will help you limit your attention to automobiles within your price range.
Begin by totaling up all of your monthly income and all of your monthly expenditures to establish a budget. Make a note of whether your expenditures are fixed (such as rent, utilities, or student loan payments) or discretionary (such as going out to eat or buying new clothes).
Once you have a clear picture of your expenditures, you’ll likely see many places where you may save money, allowing you to put more money toward your monthly vehicle payment.
In general, your vehicle payment should not exceed 10% of your monthly take-home income. When budgeting for a vehicle, though, your monthly payment isn’t the only consideration. You should also include in the continuing costs of owning a vehicle, such as insurance, petrol, and repairs and maintenance.
Examine Your Purchasing and Financing Options
When you’ve whittled down your ideal vehicle list, it’s time to consider how you’ll pay for it. Unless you’ve saved up enough cash to buy a vehicle altogether, you’ll need to finance the purchase with an auto loan.
A car dealership or a third party, such as a bank or credit union, may provide financing. You may frequently obtain better terms from a bank or credit union since car dealers will tack on extra costs for processing the loan.
Preapproval for a loan via a third-party lender may also offer you bargaining leverage with the dealer to determine whether the loan conditions are acceptable.
Enhance Your Credit Score
Checking your credit score before applying for a loan can help you determine which loan conditions you’re likely to qualify for. Begin by obtaining a copy of your credit report and ensuring that it is correct. Then have a look at your credit score.
Having good to excellent credit (a FICO® Score of 700 or above is usually considered outstanding to exceptional by lenders) makes it simpler to qualify for advantageous loan conditions.
Consumers with the best credit scores pay $522 per month on average for a new vehicle loan, while those with the worst credit scores pay $562 per month, a difference of $40 per month.
Put Money Aside for a Down Payment
What is the minimum down payment on a car? Most lenders want a down payment of at least 20% of the car’s price, much as they do when buying a house. (A 10% down payment is usually adequate when purchasing a used vehicle from a dealership.)
A 20% down payment makes perfect sense for a variety of reasons:
Because new vehicles lose a significant amount of value in the first year of ownership, a 20% down payment ensures that you never owe more than the car is worth.
The more money you put down, the less the loan you’ll need.
A larger down payment usually results in better loan conditions, saving you money in the long run.
You can check out a Plenti car loan, you’re going to find the right one for your needs.
Think About Buying Used
Do you have your heart set on a brand new car? When you learn how much that new car fragrance will cost you, you may have second thoughts. The current average payment per month for a new car is $161 more than the average monthly payment for a used car, according to Experian data ($554 vs. $393).
For first-time vehicle purchasers on a budget, buying a used car is frequently a better choice. Cars that are less than five years old usually have many of the same safety features and innovational bells and whistles as newer models but at a lower price.
Search for dealers who sell two- to three-year-old cars which are coming off leases if a five-year-old car is too “vintage” for you.
Have the Vehicle Inspected
Whether you’re purchasing a used vehicle from a friend or a dealership, you must always get it inspected by a reputable technician first. A pre-purchase examination is a service provided by most car repair businesses. This procedure may cost a few hundred dollars, but it will be money well spent if it prevents you from purchasing a vehicle with significant problems beneath the hood.
Even a certified pre-owned vehicle should be inspected by a third party before being purchased. CPO examinations usually concentrate on key systems and apparent flaws.
Independent technicians can see minor flaws, shoddy fixes, and possible future concerns. Get a documented inspection report from the dealership to provide to your technician if the vehicle has been examined.
Work and Negotiate Out a Price
Both dealerships and individual vendors anticipate you haggling over the car’s price. Because a used vehicle doesn’t have a fixed MSRP (manufacturer’s recommended retail price), you’ll have more wiggle space.
Even if you’re buying a new vehicle, you can usually negotiate a substantial discount on the retail price.
Find out how much the vehicle is worth by studying its value on auto websites to drive a hard bargain. If the vehicle includes “extras” like a leather interior or a top-of-the-line infotainment system, be sure you factor them in.
When you’ve calculated an anticipated average price, subtract 10% to 20% from it and make an offer to the vendor. If you’re pre-approved for a loan or paying cash, you’ll have greater negotiating power.
Vehicle Ownership: Simplified
Being a first time car buyer doesn’t need to be overly complicated. We hope that our guide has shed some light on the process and how to get your first car and set up the car budget of your dreams.
And, if you enjoyed reading our article, then you’ll love checking out our additional tips and tricks. All of them (and more) will be available in our automotive section.