Buying your first car is an exciting milestone. It takes an immense about of research and planning but the work pays off in the end. Your first car is usually one of the first big purchases of adult life, and making a mistake could easily be detrimental to your financial stability for years to come. Rather than set you back, your first car needs to function in a way that matches your lifestyle, budget, and hobbies. It should allow you to see what you want to see, go where you want to go, and do what you want to do. In order to find that perfect mix, consider the following tips before you get ready to drive off the lot.
Know Your Budget and Financing Options
Knowing how much you can spend is probably a given, but it’s easy to get caught up in the excitement and forget about the numbers. Your budget should include the largest upfront down payment that you can afford plus the following monthly payments with interest, assuming the car will have to be financed. Keep in mind that interest rates are more likely to be lower with a larger down payment, so make sure to crunch the numbers on interest rates to determine your total cost of the car. Don’t let dealerships hold all the cards – ask your bank, credit union, or insurance provider about interest rates before going to the dealer. This way you’ll be knowledgeable and ready to talk money once you find a car you love.
Understand Buying New vs. Used
Deciding between a new or used car is a calculated decision that significantly affects your budget. Remember, it’s not all about the upfront costs. Depreciation is a big deciding factor here. A new car loses on average 10% of its value the second it leaves the lot. Bought a car worth $20,000? That’s $2,000 you’ll absolutely never get back, even if you decide to sell it the next day. Used cars have lower upfront costs and typically fewer risks. They hold their value longer because they’ve already passed their prime depreciation point. Older models with low mileage can be a great alternative, although harder to find. Shop around frequently on dealership websites to get a feel for the price range of your desired car. Or to get a bigger picture of the market, do a general Google search such as “used Audi for sale in Orlando” or “low mileage Fords in Phoenix.” This way you’ll be able to spot a good deal that you might not be able to find on a dealership lot.
Shop Around for Insurance Rates
Insurance is expensive for new drivers, so it’s important to get the best rate possible. Insurance companies consider new drivers to be risky because they’re less experienced and tend to get into more accidents. Be sure to get quotes from a few different insurance companies before purchasing a car. This will be another added expense to your cost each month on top of the monthly payment, so calculating this into your budget is important.
Determine Your Needs
Remember to really think about the functionality that your car needs to have. How many people do you need to fit? What activities do you like to do? What kind of weather will this car endure? It’s key to find a few models that will fit your lifestyle and then focus your research efforts on those. Find out what other people are paying by going to third party websites. Uncover as much as you can about the price and packages available, this way you’ll know exactly what you want and how much it should cost. It’s much easier going into a dealership equipped with prior knowledge because you won’t be pushed into a purchase you aren’t prepared for. And don’t forget to think about your future plans. Will you resell it? Or will you drive it into the ground? After five years of ownership, a new car will be worth 60% less on average. It’s important to determine whether the car will be driven until the end of its useful life, or resold.
Overall, buying your first car requires a bit of work if you want to be successful and save some money. But don’t let it overwhelm you. Use as many resources as possible. Ask your friends, your family, or coworkers for any tips on how they found their car. If it feels like a daunting task, just remember that it all pays off in the long run when you find a great car that can take you on many new adventures.