Buying Your First Car – 5 Tips for Success
Considering a new car? Buying a car, especially if you’ve never done it before, can be extremely stressful, just because there’s so much to think about. That being said, it’s well worth putting in the extra time to plan ahead. In doing so, you’ll save time and money. Plus, you won’t end up with a lemon! These five tips will help you get started.
1. Leave room in your budget
Buying a new car? You’ll probably need at least a few thousand dollars in your savings account for the down payment, plus some room in your budget for regular auto loan payments of several hundred dollars. Even used cars are expensive, but in many ways, they’re a lot more economical than a new car. According to Kelley Blue Book, most cars lose 20 percent of their value in the first year, and 60 percent of their value within five years. When you consider the fact that most five-year-old cars don’t have many problems, a used car is a great deal.
2. Do your homework
Make sure you learn as much as you can about your car before you buy it. Websites like ConsumerReports.org and kbb.com (Kelley Blue Book’s official website) can give you unbiased information about the value of your vehicle, its reliability and even the driving experience. If you’re buying a used car, make sure to get the repair records and, ideally, a CARFAX report. It’s also important to test drive a vehicle before you consider purchasing it. This is the only way to know if the vehicle is comfortable for you and handles the way you like it.
3. Consider a cosigner
Need a loan? If you’re in your early 20s, you may not have enough of an existing credit history to qualify for a good interest rate. If you have a parent or guardian who’s willing to cosign your loan, you may qualify for lower payments and better terms, and you’ll work on building your own credit history in the process. Be careful with this arrangement, however. Cosigners are legally responsible for making the loan payments if you can’t keep up, so you need to be fair and uphold your end of the bargain.
4. Pay a fair price
Even if you already know the exact make and model you want, don’t run out to buy it right away. Car prices can vary drastically depending on the seller you’re working with. Some people recommend viewing at least 15 cars in your price range before you make a purchase, but regardless, you should at least get estimates from several different dealers.
When you’re discussing prices with people, don’t be afraid to negotiate. Many sellers are willing to come down 10–15 percent, and this is especially true at dealerships where they expect you to negotiate. If you’re buying a used car, Kelley Blue Book will tell you the make and model’s value for that given year. Knowing this will help you and the owner settle on a fair price.
5. Consider car alternatives
Maybe you really do need a car for work, school or both, but then again, maybe you don’t. When you factor in your total cost of living, cars aren’t always the most economical choice for everyone, especially if you live in a big city, and they’re definitely not the greenest choice. Take a look at your public transportation, walking and biking options before you make your decision. Government programs and certain businesses might even subsidize your commute cost. For example, Wage Works is a commuter program that lets you buy train or bus tickets out of your salary before taxes, which can save you up to 40 percent on their total cost.
|Laura Edgar writes on personal finance for NerdWallet. This article was provided compliments of NerdWallet.com, a consumer finance news and comparison website committed to helping you save money.
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