Tips to consider as a first-time car buyer
Now that time has come for you to own your first car, let nothing get between you and your goal. However, you should not rush to a vehicle dealership. Rather, take time to plan and establish what you want from a car.
In this guide, you will learn about the things you need to consider as a first-time car buyer. It will help you get the vehicle you want at an affordable price.
Establish your budget
Setting your budget is the first step to purchasing a car. The budget helps you narrow down the cars in your price bracket to avoid breaking the bank. Start by adding up all your monthly income and expenses to create your budget.
Ensure you categorize expenses as either fixed or discretionary. After you have an idea of your expenses, you may realize some areas you may cut back. This way, you will have more money for your monthly car payments.
The rule of thumb is to ensure your car payment never exceeds 10% of your monthly take-home earnings. It is just one of the factors when budgeting for a vehicle. You still need to take into account ongoing expenses for owning a car.
Another factor to consider is the loan terms. Usually, auto loans vary from 36 months to 84 months. If the loan repayment stretches for long, you will have low payments per month but it attracts more interest.
However, if you choose a cheaper car and make a larger down payment, you can decide to go for a shorter loan term. It will keep your monthly payments manageable. Also, platforms like Gettacar.com can help you appraise an old vehicle for a trade-in and find a good deal.
Research your vehicle
After establishing your budget, you need to see what vehicles fit in your price range. You can do this online through dealership websites and automotive websites. Doing the research will let you know how much owning a car will cost you.
As you do your research, you will be tempted by the amazing deals on vehicle leases. Most buyers prefer to own their cars outright; however, there are various advantages of leasing one.
After all, leasing gets you a brand new car at a lower down payment and monthly payment compared to buying. Besides, the limitations are restrictive. You may have issues putting money in a vehicle you will eventually return.
So, it boils down to your needs and personal preferences.
Explore your purchasing and financing option
Once you narrow down your dream car list, now it’s time to think about how you will finance it. Unless you have enough savings, you will need an auto loan to buy your first vehicle. The majority of new and used cars are financed.
You have the option of getting financing from the dealership or a third party like a credit union or a bank. If possible avoid dealers since they include extra feed for handling the loan and opt for a bank or credit union.
If you manage to get preapproved for a loan through a third-party lender, you will have negotiating power. This way, you can see if the dealer can match the loan terms.
When applying to multiple lenders, ensure you apply to all in a short period. Once you have settled to buy your first car, your options on where and how to do it are many. It will all depend on whether you want a new or used car.
You have the option of purchasing from a dealership, private seller, online car-buying websites, or dealership websites. Some even deliver the car to your home.
Know your credit score
Establishing your credit score before seeking financing will give you an idea of the loan terms you are eligible for. Begin by getting your credit report and evaluating it to ensure it is accurate. Next, check your credit score.
If you have a good to exceptional credit score, it will be easier to qualify for favorable loan terms. In case your credit score is nowhere near that, consider postponing the purchase if the car is not necessary.
In the meantime, work on improving your credit score. To achieve this, pay your bills on time and pay down your debt.
Save for a down payment
The amount of down payment for your car will depend on whether you go for a used or new one. Most lenders require at least a 20% down payment for a brand new car or 10% for a used one.
Consider purchasing a used car
If you are on a budget, buying a used car is the best option. Vehicles that are less than 5 years old usually have similar features and technology as the new models. Of course, at a much cheaper cost.
You can buy these from a private seller or an auto dealership. Most manufacturers and dealerships even offer certified pre-owned cars. Such cars usually undergo thorough reconditioning with limited warranties and extras.
Get it inspected
When purchasing a used car from a dealership or private seller, you need to get a trusted mechanic to inspect it. It may cost a few hundred dollars, but it will protect you from purchasing a car with major issues.
If the seller is not comfortable with an independent inspection, it should be a red flag.
Negotiate the car price
Usually, the car seller expects you to haggle over the price. You will have considerable wriggle space with a used car. That is not to say you can’t negotiate the price of a new car.
Prepare for this by researching the value of the car on various automotive websites. Timing can also help get a better deal. For instance, if you want a new vehicle, you can wait until the last few months of the year.
Read the contract
The process of purchasing a vehicle is lengthy and stressful. So, by the time you have the contract to sign, you will probably be eager to sign it without reading it.
Some dealers count on it and put extra charges or change the terms. So, regardless of whether you are purchasing from a dealer or a private seller, take time to read the contract in full before signing.
Enjoy your first car
Congratulations on buying your first car. A lot of things go into the process; however, if you follow these steps it will ease the stress associated with the process. You won’t be taken for a ride if you do some budgeting, research, and planning.