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I’m a First Time Car Buyer: What Do I Do?

Buying your first car is a significant milestone and can be a step towards independence and freedom. Yet, it can also be scary-especially if you’re a first-time buyer navigating the process alone. To help you along in this process, this guide will give you the information and confidence you need to embark on your car buying journey!

1. Create a Budget 

Setting a realistic budget is one of the most important steps in buying your first car. It’s not just about the sticker price-you need to consider all the costs associated with owning a car. Here are all the costs you should keep in mind:

  • Purchase cost, including cost of the title & registration & taxes
  • Insurance 
  • Car payment (if getting a loan)
  • Fuel 
  • Maintenance, such as oil changes
  • Possible future repair costs 

Start by determining how much you can afford in the initial purchase. This not only means the down payment, but also the title of the car, registration, and taxes, which usually adds on a few hundred dollars. 

Next, determine how much you will be able to spend each month on car-related expenses. This includes your car payment, insurance, fuel, and maintenance. Remember, don’t spend more than you can afford.

Here is an example of this process: 

You find a car you want to buy and it costs $15,000. You plan on getting an auto loan and have enough to put a $2,000 down payment with monthly payments of $250. Then you add on the cost of insurance, which comes to be $150, as well as gas, which totals around $95 a month. Now, your monthly payment on the car comes out to be around $600. 

This means you should have about $3,000 ready for the down payment and any taxes, as well as emergency savings for repairs, and enough income coming in to pay for the $600 a month and have leftover for other needed expenses.

As you can see, costs can add up quickly when buying a car. If you want to see how much you can afford with an auto loan, check out our auto loan payment calculator!

Remember: stick to your budget! It’s easy to get swayed by shiny features and upgrades, but they can quickly inflate the price.

2. Research, research, research. 

Before stepping foot in a dealership or meet with someone from Facebook Marketplace, it’s crucial to do your homework. You can use J.D. Power  or Carfax as reliable resources in your search about specific cars. 

Here are some points you may want to consider looking at:

  • Price
  • Mileage 
  • Safety ratings
  • Reliability scores
  • Fuel efficiency
  • Any past damage
  • Resale value

As you do this, you will find out what you value in a car and learn new things about cars you didn’t know before!

3. Decide on a New vs. Used Car

When being a first time car buyer and buying your first car, one of the first decisions you’ll need to make is whether to buy new or used. Both options have their pros and cons.

  • New cars can be appealing. You get the latest features, full warranty, and the assurance that the car hasn’t been mistreated. However, new cars can be expensive and depreciate quickly.
  • Used cars are typically more affordable. They’ve already undergone the biggest depreciation hit. But, they may come with hidden issues or less warranty coverage.
  • Certified pre-owned vehicles can be a good middle ground. They’re used cars that have been inspected and certified by the manufacturer or other certifying authority. They often come with extended warranties.

Ultimately, the choice between new and used will depend on your budget, needs, and risk tolerance.

4. Get an Auto Loan

While it’s possible to find a car that you can pay in-full, it’s not attainable for everybody. And that’s okay! An auto loan may be the best option for you. To get pre-approved for an auto loan, follow these steps:

  1. Start by checking your credit score. A good or excellent credit score, which ranges from 690 to 850, can help you secure a loan with favorable terms.

If your score is low, consider ways to improve it before applying for a loan.

Also, If you don’t have a credit score yet, know that there are loans still available for you, though they will have higher interest rates and be harder to attain. If you don’t know where to start, use our free credit score toolbox!

  1. Next, shop around for the best interest rates. Don’t just accept the first offer you get. Compare rates from different lenders to ensure you’re getting the best deal. Check out UCCU’s current interest rates
  2. Once you’ve chosen a lender, submit your application. You’ll need to provide information about your income, employment, and debts.
  3. After you’re pre-approved, you’ll know your spending limit. This can help you stay within your budget when negotiating the price of your car.

Here are some loan terms to understand before getting an auto loan:

  • APR, or Annual Percentage Rate, is the cost of borrowing money annually. A lower APR means less interest paid over the life of the loan.
  • Term length is the duration of the loan. Longer terms mean lower monthly payments, but more interest paid overall, while shorter terms mean higher monthly payments, but less interest paid overall. It’s important to find a balance that fits your budget.
  • Down payment is the upfront amount you pay when buying a car. A larger down payment can reduce your monthly payments and the total interest paid.

6. Get Car Insurance

Insurance is a vital part of car ownership because it protects you financially in case of accidents or theft. You should get insurance the day that you are expecting to purchase your car. When you get insurance, there will be different types of coverage options, including comprehensive, collision, and liability. 

Different insurance providers, including banks and insurance companies, offer varying rates with different coverages. Make sure to shop around and compare quotes from multiple providers before deciding who to go with.

7. Take it For a Test Drive 

A test drive is more than a joy ride, it is a valuable tool for a first time car buyer. It’s your chance to assess the car’s performance and comfort. Here is a list of some things you may want to check on your drive:

  • Does it steer well?
  • Does it brake well?
  • Does it accelerate well?
  • Is the engine in good condition?
  • How is the tire tread?
  • Are there any unusual noises or vibrations?
  • Are the seats comfortable?
  • Is the infotainment system easy to use?
  • Does the air condition and heat work?
  • Do all the lights work?
  • Do the windows roll down and up?
  • Can the seat move?

When going to look at a car, keep a list like this with you so you can know what to look for. You’ll be spending a lot of time in this car, so make sure it works!

8. Negotiate 

Negotiating can be intimidating, but it’s a crucial part of buying a car. Your goal is to get the best value for your money.

Start by knowing the car’s market value, which you can find on Kelley Blue Book or a similar site. Use this as a basis for your negotiation—not the sticker price. And remember, everything is negotiable. This includes add-ons, warranties, and even financing. 

Take your time when negotiating as rushing can lead to mistakes and missed opportunities for a better deal. And if it doesn’t feel right, don’t be afraid to walk away. There are plenty of other cars and dealerships out there.

9. Close the Deal

Once you’ve negotiated a deal, it’s time to finalize the purchase. This involves signing paperwork and understanding what you’re agreeing to.

Read all documents carefully. Make sure you understand the terms of your auto loan, warranty, and any other agreements. As you read, don’t hesitate to ask questions and take notes. It’s important to fully understand your obligations and rights as a buyer.

Finally, ensure you have insurance in place before driving off. It’s not just a good idea, it’s the law.

10. After-Purchase Care 

Once you’ve bought your car, regular maintenance is key to keeping your car in good shape. Make sure to plan for routine services like oil changes and tire rotations. Some services need to be completed every few months, and some just once a year. 

Use resources and online tools to figure out what the routine should be for your car, such as this website. Don’t ignore warning lights or unusual noises. They could signal a problem that needs immediate attention.

While car maintenance may seem overwhelming, it is crucial to do because it extends the life of your car and prevents costly repairs. A well-maintained car not only runs better but also holds its value longer. It’s an investment worth protecting.

You’re Ready

Being a first time car buyer is an important step and can be intimidating for a student managing many responsibilities. With the right knowledge and preparation, it can be a rewarding experience and anyone can become a first time car buyer and owner.