6 Tips for First-Time Car Buyers
While it’s exciting to get your first pair of wheels, you need to slow down throughout the purchasing process to avoid landing in a huge financial pothole that can damage your financial stability. Make your car-buying “trip” a smooth ride with advance planning and smart decision-making!
1. Make a budget
With a budget, you’ll know what you can afford. Use our handy calculator to estimate the monthly car loan payment. (Remember, this doesn’t include additional purchase-related fees such as taxes, titles and licenses.)
Then factor other car costs, such as insurance costs (which can be higher for younger drivers), gas and maintenance. Finally, use the FTC’s “Monthly Spending Plan” to figure out if your income will allow for a car payment!** **
2. Pull your credit report.
Don’t be in the “I didn’t know it said that!” group. Instead, pull your report, see what it says and fix any errors before the finance department takes a look at it. Go here to get yours for free!
3. Do your car-buying homework.
** **Study options, prices and ratings. Ideally, you want a car that:
- has a solid resale value
- won’t cost more to insure or offers options that can reduce your premium
- offers a great MPG
- and has an excellent maintenance track record
Will your car fit your lifestyle and needs—do you need a large cargo or trunk space, four doors, special options?
Once you’ve decided on the specifics, get detailed quotes in writing from several dealerships so you can compare “apples to apples”!
4. Know if you’ll need a co-signor for the finance contract.
If you’re under 18, not currently employed, or have little/no or poor credit history you may need a co-signor. Better line up that person before you go any further. ****
****5. Familiarize yourself with car-buying lingo.
Bone up on terms like APR, credit insurance and****Guaranteed Auto Protection, just to name a few. Also, know the difference between leasing and financing, and be sure to ask about the value and price of aftermarket products. (Tip: if you don’t know what it is or you know you don’t want it, don’t sign for it!)** **
6. Research your financing options.
You need to know all the details—from interest rates to additional fees—to get the final “cost to own” figure (what it ultimately cost you to own that car after you make all the payments).** **
Keep in mind finance rates can be affected by your credit score (see #2), the vehicle price, the availability of manufacturer incentives, the amount of your down payment, your debt repayment options, and the length of the finance contract. Shop around: talk to banks, credit unions and the dealership to get the most bang for your car-buying buck.