urchasing a car is the first step to independent adulthood. You don't have to ask your parents or siblings for permission to drive their vehicle or ask someone to give you a ride. But, as convenient as it seems, buying the first car can be a bit of a hassle. There are many things to consider since it's a significant purchase in your life, and you cannot afford to go wrong. Here, you'll find all you need to know about making your first car purchase.
Checklist and Tips For First-Time Car Buyers
1. Determine Your Budget
Before starting the purchasing process, it's crucial to determine your budget first. An established budget will give you a clear roadmap on what to look for and how much you can afford. You should assess your current financial situation, including your income and expenses. A car has high maintenance costs, including fuel expenses and servicing charges. So, you must analyze your finances to determine if you can afford a vehicle and, if so, how much.
You might be wondering how much should you spend on a car? There is no hard and fast rule, but the experts believe you must not spend 15% more than your monthly income on auto expenses. You can use the auto loan calculator for a rough estimation of how much it would cost. Then, set a limit for a maximum. While developing a budget, don't forget about tax, licensing, insurance, and other maintenance fees that come along with the price of the car. Having a predetermined budget helps you narrow down your options and prevent overspending.
2. List Important Car Features.
After setting the budget, you should list down the essential car features you need in a vehicle. A car is a big purchase, and you can't afford to regret buying the wrong one. Some common things people look for include:
- Resale value
- Engine size
Sort them in order of priority so you can determine which features you are prepared to compromise on and which ones you aren't.
3. Decide Between A New And Used Car.
When buying a car, every car buyer is presented with two options: a brand new car or a used car. Each has perks, depending on your budget, requirement, and choice. You can weigh the pros and cons of a new and used car to decide which better fits your needs and requirements.
Here are the pros and cons of a new car:
- You can buy the latest model with new features.
- Purchasing new cars has better financing
- Warranty perks
- Wide range of options
- Depreciation hit
Here are the pros and cons of used cars:
- Cheaper option
- Better insurance rates
- Less depreciation
- Potential for costly maintenance and repairs
- Outdated model and technology
- Less mileage
- Unknown driving history
4. Narrow Down Car Options
After you have your budget and decide whether to buy a used or new car, you can begin looking for models that meet your criteria and budget. You can look at car dealership and marketplace websites to get all the necessary information. Buckle up and start to research. Look for the car's customer reviews, safety ratings, and market prices. After that, filter down the ones that best meet your needs and budget.
5. Shop Around
Window shopping is key to market research. You can shop around to get first-hand information about each vehicle. Acquire all the information you need from the dealers, including the estimated cost, availability of the models, and after-sale service. Purchasing from a good dealer is just as important as buying a good car. Look for reviews on the dealership and confirm if test drives and after-sale services are offered.
6. Compare Price Quotes
Different dealers might charge different prices for the same car. To get a fair price, go through the quotations from many dealers and then compare them.
7. Compare Auto Insurance
While the majority of car purchasers choose to insure their vehicles via the dealership, it is always a good idea to shop around for the best bargain on car insurance. Insurance is the second-most expensive expense after the purchase of a car. So, shopping for insurance in advance helps you compare the offers and find the best policy per your needs and requirements. You don't have to buy a car to look for insurance rates. You can finalize an insurance policy before purchasing a vehicle and activate it on the day of purchase.
8. The Best Time To Buy The Car
Timing also plays a critical role when purchasing a car. If the purchase isn't urgent, you may put it off for a few months or days to get the best deals and offers. The ideal time to buy a car is anytime between October and December. At this time, the dealers have pressure to meet their yearly sales quotas and clear room for the new inventory in the new model year. Thus, the dealers are more open to negotiation and mark the price lower.
In addition, Monday is regarded as the best day of the week to purchase a car. Most people buy cars on weekends when free and out of work. When most prospective buyers are at work on Mondays, the dealers are more willing to negotiate since fewer customers are around.
9. Get Preapproved
It's crucial to have your financial plan laid out before you purchase the car. Having a preapproved auto loan helps you in the negotiation battle. You can shop for an auto loan from banks or credit companies. You can also get financing at the dealer, but it can be expensive. A preapproved auto loan is cheaper and helps you lock the car at a reasonable rate.
10. Go For The Test Drive.
Before purchasing the vehicle, you should go for a test drive. When you are at it, don't let your emotions get the better of you; instead, remain aware. It's likely to get emotional when you are one step away from having your dream car. However, you must stay aware and concentrate on determining whether the vehicle is a good match. It's not about getting the first car; it's about making a valuable purchase. In addition to the car's overall performance, it's essential to consider how well it meets your specific wants and requirements.
This inspection is much more critical when purchasing a secondhand car since there are high chances of wear and tear. Get a vehicle history report and thoroughly inspect the whole vehicle to ensure no flaws. Take your parents or friends with you on the test drive and see if the car is worth it.
11. Negotiate Price
After you decide to buy the car, it's time for the negotiation battle. You have to be prepared; your weapons for battle are your preapproved loan and price quotes. Be patient and talk with the dealers to come up with a negotiation. Walk away if you're unable to strike a deal.
The dealer may use the "guilt technique" to make you feel bad about wasting their time. But, as a customer, you have the full right to walk away if you are unsatisfied. If you come to an agreement, dealers will try to sweeten the deal by adding extra features, services, and perks. Don't be tricked into thinking you have to take them; they aren't a must.
12. Finalize Your Insurance Policy
You must activate the insurance coverage before making a vehicle purchase. Even though insurance is often purchased over the counter, it is always preferable to have alternatives in mind. Compare the insurance rate with a counter-insurance policy and decide which coverage is best for you. Send your insurance company the VIN (Vehicle Identification Number) information and a copy of your driver's license, social security number, and financing documents. Before driving off in a new car, you need to complete insurance paperwork and activate coverage.
13. Seal The Deal
Before signing the final contract, read all the fine print carefully. The terms and conditions should be the same as communicated, and if you see any discrepancies, don't hesitate to ask them to address those issues. Usually, the dealer tries to add extra fees to wire some extra cash. Since most of us are drained throughout the process, unlikely to read all those terms and conditions, and tempted to close the deal as quickly as possible, they try to sneak in some additional costs. Make sure you have read all fine print before sealing the deal.
14. Bring Your Dream Car Home.
The moment you have been waiting for. After your auto insurance is activated and the deal is settled, you can finally take delivery. After signing your paperwork, wait for the car's key to be handed over. Congratulations on your new car!
Auto-Financing For First-Time Car Buyers
Auto financing can be a bit tricky for first-time car buyers. This is because they may not have built enough credit to qualify for the auto loan program. Even if they are approved, the interest rates tend to be higher. Parents or cosigners with good credit profiles can help to get a loan approved at reasonable rates. But, this is not always feasible. Thus, car manufacturers or lenders offer a special program to make the vehicle more accessible to new buyers - it's called the first-time car buying program.
What Is A First-time Car Buying Program?
The first-time car buying program is specially designed for first-time car buyers to help them purchase their first car. While approvals of loans depend on your credit history and scores, it is possible to get an auto loan through this program even if your credit history does not meet the standard specifications of a lender. The program provides flexibility in terms of credit standards, but they have criteria for eligibility. For example, you may have to be a recent college grad or purchase a specific car model.
Where To Find A First-Time Car Buying Program?
Limited lenders and auto manufacturers provide a first-time car buying program. It would be best to research online to determine which lenders and automakers offer this form of financing. As a resource, here are some automakers that provide a first-time car buying program.:
Toyota's First-Time Buyer Program
Toyota helps recent college graduates purchase their first car with the college grad program. It offers special rebates and competitive interest rates and even waives the security deposit on the lease. It provides a $500 rebate when you finance or lease any Toyota car through the dealer and Toyota financial services.
Ford's First-Time Buyer Program
Ford's flex buy program helps first-time buyers make their first purchase on a tight budget. It is available to anyone who finances under Ford Credit. It provides a unique payment structure that allows lower payments for the first three years of the loan. It also offers a term of either 66 months or 75 months and a 15% or 18% discount in the first 36 months.
Furthermore, it also provides Ford Drives U that offers college grads a $500 bonus cash for purchasing or leasing a new Ford vehicle.
Honda's First-Time Buyer Program
Honda offers College Grad Program that offers $500 in savings on a purchase, the option to defer the first payment for two months, and flexible finance and lease plans. To be eligible for the program, you would require proof of employment, have graduated in the past two years or will graduate in six months, and have no bad credit history.
Hyundai's First-Time Buyer Program
Hyundai offers College Grad Program $400 bonus cash for purchasing or leasing a new Hyundai. However, the offer is not valid for preowned vehicles. To be eligible for the program, you must have graduated within the past two years or will graduate in six months. You would also need to submit a copy of your diploma or letter of graduation from the University and proof of employment.
Purchasing your first car is a significant purchase and a milestone. Many first-time car buyers are intimidated by the process since many factors exist. Not to mention the plethora of choices, from color to brand and model, to pick from. However, the essential components of the car-buying process are proper planning and the ability to walk away from a bad deal.