Buying a car for the first time can be a lot of things: stressful, exhilarating, confusing, and (hopefully) rewarding. While you should approach this process carefully and with a fair amount of caution to ensure you do things properly, it can also be a lot of fun that ends with you driving away in a car you’ll enjoy for many years to come. Fortunately, the car-buying process has never been easier, and you have more resources at your disposal and options available to you when shopping than ever before.
All you have to do is take advantage of this situation––something you’re already doing by reading about what you need to know. You may already know some of this stuff, but a reminder is never a bad thing. Ultimately, remember to take your time, approach the situation with knowledge and a fair amount of caution, and take things one step at a time.
Tip #1 – Figure Out Your Budget
I get it, you probably don’t want to start your car-buying journey by sitting down and looking at your finances, but this really is the best place to start. Before looking at different models, features, and options, you need to know what you can afford. This means looking at your budget: specifically how much money you bring in each month and how much you spend each month on necessities. Be realistic here because this is very important.
Most experts suggest spending no more than about 10% of what you make each month (before taxes and everything else) on a car payment, with about 15-20% of your total income being allowed for all vehicle expenses. This means if you make $3,000 a month, then your car payment shouldn’t be more than about $300 each month. Once you add in gas, insurance, and other costs, you should be spending no more than $600 per month for your vehicle if you want to be able to afford the rest of your existence.
You can find a number of excellent calculators online to help you look at your finances and figure out your budget. These tools give you a realistic sense of what you can afford, not only in terms of monthly payments but what sort of loan will allow for that (more about loans down below). Trust me: this is the best place to start before going any further.
Tip #2 – Figure Out What You Need
As you’re determining what your budget looks like, now is also a good time to realistically look at what you need from a vehicle. Be pragmatic here and reflect on what uses you have or will have for your new car on a daily basis. Try to think long-term as well, at least as much as you realistically can, because you’re going to have this vehicle for many years.
Trucks are flashy and popular, but they’re also expensive. Ask yourself if you really have a use for what they offer? A sports car can be a lot of fun to drive, but if you have a kid on the way, then they’re also incredibly impractical. SUVs offer terrific functionality and can be fun to drive while also being practical: but consider how large a model you really need. Take your time with this process and weigh the pros and cons of different types of vehicles, sizes, and more.
Tip #3 – Do Some Research
Once you have a sense of a budget, which should include how much you can afford for a down payment and monthly payments on a loan (if needed), as well as the type of vehicle that would be best for you, then it’s time for the most exciting thing of all: research! Joking aside, doing research is vital to making sure you get the right vehicle and don’t have regrets later about not choosing a different model. It’s not thrilling, but it will save you time and money.
Look at the details for different models and compare their specs. Write things down, take notes to compare, and give yourself an advantage for finding the right vehicle. The whole point of this is to empower yourself with knowledge, so treat this seriously and you can get a ton of great information through a wide range of websites.
Tip #4 – Look at Dealer Options
Assuming you now have a sense of what you want in a vehicle, start looking at dealerships in your area. If you’re shopping used, you can choose to buy from a private seller, but this can be very risky and requires a ton of caution. A good dealership will make buying easy, offer you a lot of options, and they’re under state and federal regulations designed to protect you. Look at your options and come up with some dealers that seem promising—you can always use them against each other later.
Tip #5 – Figure Out Financing
When you looked at your budget earlier, you were trying to figure out what you could afford-now you need to figure out how to afford it. If you can pay for a vehicle in cash without any additional financing required, then your life is going to be very easy. Most people, however, need a loan to help pay for a vehicle—figuring out your lender before you go to a dealership gives you a lot more power while you shop.
If you have a bank account or an account at a similar financial institution like a credit union, then that’s a great place to start. Since you already have a relationship with them, they may be willing to offer you better terms than a random, third-party lender. Look around and try to get the best terms possible regarding both the duration of the loan and the interest rate before you ever go to a dealership. Most dealers will offer to help you figure out financing, and you should listen to what they can get for you, but if you already have something in your pocket, you’re free to pass if the terms you secure beforehand are better.
Tip #6 – Take a Test Drive
I cannot overstate the importance of this: whether you’re looking at a new or used vehicle, take it for a test drive, and I’m not talking about a quick five minutes down the block and back—that doesn’t tell you anything. You should spend at least 30 minutes test-driving any vehicle you’re seriously interested in buying. Drive it around city streets, go through a parking lot or two, get on the freeway to feel how well it accelerates to merge and how it handles a daily commute or a long road trip. You want to know what it would be like to drive this thing every day for years, so get a realistic feel for it before making any decision.
Tip #7 – Take Your Time
Throughout every step of this car-buying process, one of the most important things you can do is take your time and consider all of your options. Never feel pressured or rushed into making any decision—especially if a salesperson is the one doing the pushing. No matter what they say, you don’t have to make the choice right then and there.
If possible, give yourself the time to shop around, do your research, and find the perfect vehicle. The process can take weeks or months—you won’t always have that kind of time, but it helps if you can take it. Remember that at the end of the day, you’re the customer and you have the power to simply walk away and think it over.
Tip #8 – Prepare to Haggle
This may seem strange and feel weird if you’ve never done it before, but you should be ready to haggle and negotiate for the best price possible. In your research, you’ll get a sense of what the vehicle you want should reasonably cost; take that number, cut about 20% off the price, and then offer to pay that for the car you want. The dealer will probably say no, but it’s a place to start. They’ll make you a counter-offer—go from there and work toward the best price you can get.
Remember how I said to find multiple dealers in your area? Send the offer to several of them who have the vehicle you want (an email is a great tool for this) and see how they respond. Use the best counter-offer and send it to the other dealers to see if they will beat it. You’re the customer; you have the power here so use it to your advantage.
Tip #9 – Read All Contracts Carefully
Finally, once you’ve done the work and it’s time to sign on the proverbial dotted line, read all of the contracts and paperwork very carefully. This is a serious legal document you’re signing that you’ll be obligated to for years, so take your time—read it a few times to be sure you understand everything. If you’re confused at all, then have a friend or family member you trust, who’s good with this sort of thing, come and help you. Don’t be afraid to ask questions, take your time, or even look foolish—no one is born understanding complicated financial documents. You’re better off taking an extra hour or two to ensure you understand every detail of what you’re signing, rather than learning a year later that you’re stuck in a bad situation.
Now take a deep breath, let your shoulders relax, and start figuring these things out. I believe in you; you’ve got this!
