Few moments are as exciting as buying your first car. It’s a huge milestone for both first-time licensees and those who’ve just recently been able to manage a car payment. Putting some thought into it before you begin to shop can be extremely helpful and help you avoid buying the wrong car. Here are the 7 steps you can follow to ensure you make a great purchase and a smart financial decision.
The first thing you should do is write a list of your needs on paper and start to prioritize the most important items you absolutely need in a car. It might be that you have a strict budget to stick to or you need a car with lower mileage or maintenance cost. Maybe having a convertible or a certain make is non-negotiable; whatever it is, make a note of it and prioritize.
After you’ve identified your needs you should set a realistic budget that could be enough for taxes, gas, the occasional maintenance and a payment if you decide to finance. Make sure to compare the number you come up with to your monthly income so that you can know what percentage of your income will now be for your car. A prudent monthly car expense would be 10% or less of your income.
Depending on your budget, credit, and total cost of the car you aim to purchase, financing might be the only or best option available to you. Even a used car can run you $10,000, plus the other cost associated with registration and insurance. Car loans are something that some people advise against because you’re financing a depreciating asset. Leasing is an option although it does leave with the need to renew the lease every two or three years and take on the associated costs. The advantage of leasing is that you get to upgrade every time you go to renew your leasing contract.
If you’re going to finance or lease they’ll need to pull your credit and see your score and history of loans and timely payments. Make sure you know where your credit score stands and what factors are contributing to your score, especially if there are items that are hurting your overall credit score. Maybe you need to work on your credit and possibly remove a few items that can boost your score and result in a lower interest rate and ultimately save you money.
Once you know your needs, your budget and credit score you can start to put that money together to get ready to jump on any car that you see as the next car for you. Talk to a few dealerships about the down payments needed for the types of cars you are interested in. Once you know the amount, set it aside and then calculate the associated costs and add the two amounts; this will be the total cost of purchasing your first car. Set it aside and don’t touch it.
Time to hit the web and the local dealerships and start shopping for your first car. You know your needs, know your credit score and have done everything to improve it, and most importantly you know your budget and have the cash to close. Take your time, look at many cars, get the car checked out by a mechanic and make sure to take it for a test drive. Make sure to visit multiple dealerships and thoroughly explore your options before committing to a vehicle.
Once you’ve spotted the vehicle that fits your needs, your budget, and you’ve taken it for a test drive and it’s to your satisfaction--take a minute and evaluate the situation. If you’ve done your homework then you know what’s a fair price. If you don’t see a line of people behind you waiting to make an offer to purchase the car then you are in a position to negotiate. There’s no guarantee that you’ll succeed in getting a discount but it's very likely you will and it’s definitely worth a try.
Buying a car for the first time can be scary, but if you follow these steps, you’ll get the car you’ve always wanted without overpaying. Close the deal and feel the joy of hitting the road with your new car.