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I’m a First-time Car Buyer: What Do I Do?

A young person happily test driving a new car

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, I’m a First-time Car Buyer: What Do I Do? will give you the information and confidence you need to embark on your car buying journey!

The Basics of Car Buying

Before you start shopping for your first car, it’s crucial to understand the basics. Here is an overview of what those are:

  1. Identify your needs. Are you looking for a compact car for city driving or a larger vehicle for family trips? Do you prefer a manual or automatic transmission? What safety features are important to you?
  2. Set a budget. This should include the purchase price as well as the ongoing costs, which includes insurance, fuel, and maintenance costs.
  3. Research, research, research. Use online tools and apps to compare prices, find deals, and read reviews.
  4. Understand the car buying process. This includes securing an auto loan, negotiating the price, and closing the deal. The more you know, the better prepared you’ll be.

How do I Create a Budget?

Setting a realistic budget is one of the most important steps in being a first-time car buyer. 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.

Another cost to consider is the potential resale value of the car. Some cars depreciate faster than others, which can affect your budget in the long run.

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. 

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.

Should I Get a New or Used Car?

When being a first-time car buyer, 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.

What do I Research?

Before stepping foot in a dealership, it’s crucial to do your homework. Research is a key step in the car buying process.

Start by identifying your needs. Are you looking for a compact car for city driving, or do you need an SUV for family road trips? 

Next, research different makes and models that fit your needs. Use online tools and resources to compare features, prices, and reliability scores of different vehicles.

Here are some points you may want to consider in your research:

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

Remember, knowledge is power. The more informed you are, the better equipped you’ll be to make a smart car buying decision.

What are the Steps to 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. Don’t know where to start? Use our free credit score toolbox!
  2. 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
  3. Once you’ve chosen a lender, submit your application. You’ll need to provide information about your income, employment, and debts.
  4. 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.

What Do These Auto Loan Terms Mean?

Understanding auto loan terms is crucial, so let’s go through them!

  • 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.

How Do I Get Insurance?

Insurance is a vital part of car ownership because it protects you financially in case of accidents or theft. 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.

What Should I Check For in My Test Drive?

A test drive is more than a joy ride. 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!

How do I Negotiate Effectively?

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. 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.

What Does Closing the Deal Look Like?

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. 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.

What Can I Expect After the Purchase?

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.

What Should I Not Do as a First-time Car Buyer?

We’ve gone over what you should do when buying a car, but what about things you shouldn’t do? 

Here are some common pitfalls to avoid:

  • Not doing any research on the car
  • Rushing the buying process
  • Ignoring the importance of a pre-purchase inspection
  • Not considering the cost of insurance and maintenance
  • Overlooking the importance of a test drive
  • Not understanding the terms of your auto loan

Avoiding these pitfalls can help ensure a smooth car buying experience. 

You’re Ready.

Being a first-time car buyer is a significant milestone. With the right knowledge and preparation, it can be a rewarding experience. Remember, the journey doesn’t end with the purchase. Owning a car comes with responsibilities. Stay informed, make wise decisions, and enjoy the ride!