Buying your first new car can be both exciting and terrifying. Keep your chin up though, because we’ve got you covered. These seven tips for first time car buyers will help you get the right car for your needs — at a price with which you can comfortably live.
- Determine Your Budget
Way too many people wander into dealerships without knowing what they can really afford. Take stock of your cash flow situation before you do anything else. Make a list of all of the bills you pay each month, including the amount you pay and when they are due.
Include everything; rent, food, entertainment, utilities, credit card bills, savings and investments — everything you have. Add them all up and subtract that total from the amount of cash you bring home each month. Set aside what you feel is a reasonable amount of walking around money. The rest is what you can probably afford to spend on transportation.
Keep in mind, the monthly payment is but one of the expenses involved here. You’ll need insurance, fuel, registration and maintenance money too. Most experts recommend keeping the car payment below 10 percent of your monthly take-home pay.
- Review Your Credit Report and Credit Score
Odds are you’re going to borrow the money to buy the car. This means lenders are going to want to see how you handle credit. The indicator they’ll consider is your credit score.
The higher it is, the lower the interest rate they’ll charge. So before you try to buy a car, do everything possible to get your credit score as high as it can be. This will save you a lot of money in the long run — and improve your ability to negotiate your deal.
Your credit score is based upon information contained in your credit reports. Go to AnnualCreditReport.com to get yours free of charge and take a look at them. You want to make sure the information they contain is accurate. Mistakes could drag your credit score down and cost you money. Dispute anything you see that doesn’t make sense to get them cleared up.
- Find Out What You Can Afford
Now that you know your credit score you can find the interest rate your efforts to be responsible have entitled you.
Plug this, along with the amount you can afford to pay each month into a car finance calculator. You’ll also be asked to enter the length of the loan you desire (do not exceed 60 months) and the down payment you can offer. The result will be the total purchase price you should be aiming to hit — or ideally, beat.
- Get Pre-Approved for a Loan
Now it’s time to seek a lender to front you the cash. There are a number of advantages to doing this on your own. Chief among them is walking into a dealership with a loan already in hand. This puts them in the position of having to compete with your lender. You’ll save money if they can beat your deal and you’ll still be ahead if they can’t.
- Research The Market
You’re now ready to see what’s out there in your price range. The most important thing here is being realistic about the ways you’ll use the vehicle, so you can choose something accommodating. Conduct this research online to narrow your selections to three choices before you visit dealerships. Look at each of those manufacturer’s websites to see what they offer in terms of first time car buyer deals.
While you’re there, use their configuration software to “build” the car of your dreams so you’ll have an idea of what it will cost in total. Afterwards, visit sites like Edmunds.com and KBB.com to learn what they’re actually selling for in your area. Save the configurations in your smartphone, along with the retail price and the “going price” in your location.
- Go See Them in Person
It’s time to “try them on” for fit. Go for test-drives to determine how they perform. Interact with their various features to ascertain convenience and ease of use. This will help you determine the best choice for you.
Salespeople will ask for your business on the spot. Be honest; tell them where you are in your process. Take their cards and tell them you’ll get back to them if their car turns out to be the one.
- Make Your Deal
Having found the one, go back to the salesperson with which you drove the car and work out the terms of your deal. If at all possible, wait until the end of the month, when they’re more likely to make deals to meet their quotas. Start by offering 20 percent less than your research told you the cars are going for in your area. Negotiate based upon the “out the door” price of the car (including taxes, license fees and etc).
This process can often be more effective conducted over the phone or via email. Either way, have them email the details to you when you agree upon a price so you’ll have it in writing when you arrive at the dealership.
Do NOT talk monthly payment — you already know what it’s going to be. When asked what monthly payment you’re trying to hit, say it doesn’t matter, you’re only interested in the price out the door. And, do NOT get talked into financing the car for more than 60 months. Read the contract carefully before you sign it to make sure all the numbers are what you agreed upon and you’re good to go.
These seven tips for the first time car buyer will help you get the exact vehicle for your needs at a price you can comfortably afford. This will increase your enjoyment of the automobile tremendously. It will also help take the anxiety and pressure out of being a first time car buyer.