8 tips for buying your first car
These pointers can help you make smart choices on choosing and financing your new ride
Read, 5 minutes
Buying a first car can be exciting—and overwhelming. As with so many financial decisions, research and planning can help you make the choice that’s best for you. But where do you start? These tips can guide you through the process.
What kind of car is right for me?
As you start down the road to your automotive purchase, you might begin by establishing what kinds of cars best suit the way you live and the features you’ll find most useful. Make a list of questions focused on your specific driving needs, similar to the ones below. Your answers should help you build a short list of size and types of vehicles to consider.
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- Do you live in the city, suburbs or a more rural area?
- Based on your region’s weather, are you likely to need all-wheel drive?
- Do you foresee carrying passengers frequently? How many?
- Will you be loading and hauling items? That could determine how much cargo space you need.
- Will you need a car primarily for work, everyday use or weekend adventures?
- How much space do you have to park a car at home and work?
- Does the car comfortably and safely fit your stature, whether you’re tall, small or somewhere in between?
What’s the overall cost of car ownership?
The purchase price is just part of a car’s total expense. In addition to monthly payments, you’ll have to budget for its use and care—which generally means insurance, maintenance, gasoline (or charging for electric vehicles), repairs and parking.
New or used car?
A new car, by definition, hasn’t been mistreated or in an accident. It has a warranty, the newest safety features and even that new-car smell. What’s not to love? Well, there’s the price. A new model can run you appreciably more than a used one. It also has higher insurance rates. And a new car’s value falls sharply the moment you drive it off the lot.
Because used vehicles are less expensive, you might be able to step up to a nicer model. Your insurance will be more affordable, and the car’s value generally will drop more slowly than if you bought new. At the same time, your car will have a lower trade-in value and may be more likely to develop maintenance problems. Be sure to ask for a Carfax report, which details a used vehicle’s history, including any accidents.
What about electric vehicles?
Car buyers are choosing electric vehicles (EVs) in increasing numbers, along with hybrid vehicles, which combine power from an electric motor and a gasoline engine. Because both produce significantly lower emissions, they’re considered more environmentally friendly than gasoline-powered cars.
Other pluses for EVs are less engine noise and lower fuel costs than gas-powered cars—just how much lower depends on gas prices and electric rates where you live. While EVs are usually are more expensive, rebate and incentive programs, such as tax credits, may help with the cost.
Charging an electric car can be done at home or a public charging station. Fully charging a car takes as little as 30 minutes or as long as half a day, depending on the size of the battery and speed of the charging station. Finding charging stations has become easier over the past few years, and most EVs can get more than 200 miles on a charge.
In addition to their environmental benefits over gas-only vehicles, hybrids offer the peace of mind of being able to pull into a gas station when you’re driving in areas that might not have charging stations.
Should you do your car shopping online?
Once you have a general idea of the type of vehicle you want, going online can give you access to an enormous range of dealerships and sellers, both local and outside of your area. This provides you with more car choices in your price range and allows you to shop extensively before you even set foot in a showroom. If you’re looking at a new car, ask multiple dealers to quote you prices.
Additionally, many digital tools, available both on dealer and general auto websites, allow you to fine-tune your research according to price, reliability, safety, incentives, reviews and other factors. These can be convenient ways to shop for—and even finance—a car online.
Did you know?
Asking for a quote from a car dealer will give you the “true price” of a vehicle, reflecting all the costs, fees and taxes—rather than the advertised price.
When should you start shopping around for a car loan?
Looking for a car loan before shopping for a car may seem counterintuitive, but it can be very useful. It gives you an idea of how much you can borrow and at what interest rate, which enables you to avoid making financing decisions on the fly at the dealership. Start with your bank or credit union, then get quotes from dealerships and other lenders and compare rates to make sure you get the best one.
Beyond the interest rate, consider the length of the loan and how long you think you’ll own the car. You want to avoid owing more than the car is worth when the time comes to sell it or trade for a newer one.
Pre-qualification and pre-approval—what’s the difference?
While shopping for a car loan, you’ll probably hear the terms “pre-qualification” and “pre-approval.” Here’s what they mean:
Pre-qualification: The lender reviews your financial information and believes you will qualify for a loan. You get a good idea of where you stand without affecting your credit score. That’s because the review is based on information you provide or a soft credit pull, which is a check of your credit report for informational purposes only. Pre-qualification does not mean you’ll automatically be approved. You’ll still need to go through the formal loan application process.
Pre-approval: The lender makes a conditional commitment to loan you the money for a vehicle. As part of the pre-approval process, you’ll undergo a hard credit pull, which is a detailed review of your credit report for lending purposes. Hard pulls can lower your credit score because applying for new credit may cause lenders to view you as a higher risk. It’s best not to seek pre-approval until you’re committed to buying a car in the next 30 days.
Will your credit score affect your car purchase?
Your credit score helps determine the interest rate you pay on a car loan. Better credit may help get you a more favorable interest rate, which in turn will have an impact on your car-buying budget. You may be able to get your credit score for free through your credit card provider.
Check your credit report before you’re ready to buy, to allow time to improve your credit score. Visit AnnualCreditReport.com to get a free copy of your credit report from each of the three major credit bureaus (Experian, Equifax and TransUnion).
Are you ready for a test drive?
After you’ve made all the preparations, now comes the fun part of the car-buying quest—where you learn how the car performs and how you feel in it. After you’ve identified a few cars that might be right for you, try to drive them all on the same day. You might want to call ahead and make appointments to use your time most efficiently. This allows you not only to better compare vehicles, but also the customer service at each dealership.
What to avoid when buying a car
Falling in love with a car
Keep your emotions in check. Becoming infatuated with a single model can blind you to alternatives that may be better suited to your budget and needs.
Settling on sticker price
The sticker price, also known as the MSRP or manufacturer’s suggested retail price, is the price found on the window sticker. It’s rarely the final price you pay. Instead, consider it a starting point for negotiations.
Focusing on the monthly payment
There are a lot of costs beyond monthly payments that can cause you to overpay for your vehicle. Settle on the vehicle's price first, then discuss a trade-in, financing or leasing separately, as necessary.
Buying unnecessary extras
You can opt out of dealer add-ons such as rustproofing, fabric protection or key protection. Read your contract carefully before signing it and trim the extras to keep your final cost down.
Signing on the dotted line can be a nerve-racking experience—especially because if you have second thoughts after purchasing your vehicle, you usually won't be able to return it. But the chances of that happening should be minimal if you’ve done the research, picked a vehicle that works for your needs, and lined up your financing options before going to the dealership.
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