Buying Your First Car: 5 Tips for Success
Laura Edgar is a senior writer for NerdWallet.com, a personal finance website dedicated to helping you make smart financial decisions.
Shopping for your first car is definitely exciting, but it can also be stressful. Ease the burden on yourself by planning ahead. You’ll save yourself time and money, and possibly avert disaster. These five tips will help make your car buying experience a positive one.
1. Know your budget
Cars are expensive, so if you’re like most people, you’ll probably need an auto loan. This is especially true if you’re buying a new car. You’ll need at least a few thousand dollars in your savings account for the down payment, and then another several hundred each month for your loan payments. If you’ve got a few thousand dollars saved up, you may be able to buy a used car without borrowing money. Even if you can afford a new car, don’t write-off the possibility of a used car just yet. According to Kelley Blue Book, most cars lose 20% of their value in the first year, and 60% of their value within five years. When you consider the fact that a five-year-old car won’t have many problems, if any, a used car is a great deal!
2. Consider a cosigner
If you’re a student, or even a recent graduate, you may not have enough credit history to qualify for a low interest rate without a cosigner. If this sounds like you, talk to a parent or guardian and see if they’d be willing to cosign. You’ll get a better rate on your loan and build your own credit history in the process. Remember, a cosigner must assume responsibility for your loan if you fail to make your payments. Be fair to your cosigner and uphold your end of the bargain.
3. Be cautious with add-ons
Buying a new car? You’ll learn pretty quickly that all those flashy extras come with a cost. There’s nothing wrong with buying the exact car you want, of course, but you need to be able to justify the extra costs. Do you really need those leather seats, or that sunroof? The decision is yours, of course. Just make sure you’ve had some time to think about it and weigh the pros and cons.
4. Shop around
Some people recommend viewing at least 15 cars in your price range, and narrowing it down to 3 after that. Once you find your perfect car, don’t be afraid to negotiate. Many sellers are willing to come down 10-15% on the price. If you’re buying a used car, make sure it has a maintenance history, and get a Carfax report if you can. You should also check your desired make and model’s Kelley Blue Book price to see if you’re getting a good deal. And, of course, it’s always good to have a trusted mechanic inspect your vehicle before you buy it.
5. Consider car alternatives
Maybe you really do need a car for work, school or both, but then again, maybe not. Take a look at your public transportation, walking and biking options first. Cars are great, but they’re not the most economical or convenient choice for everyone, and they’re definitely not the greenest choice. You have to see how it factors in to your total cost of living. If you’re looking to save money on public transportation commute costs, try using Wage Works. This commuter program lets you buy tickets out of your salary before it’s taxed, for a savings of up to 40%. Talk to your employer, if you are interested.