Buying your first car is an exciting milestone, but it can also be an overwhelming process. Here are ten great tips to help you navigate the car buying process and make a smart purchase that fits within your needs and budget.
1. Budget What You Can Afford
Setting a firm budget is essential in making a purchase that works for your needs. Start by figuring out what you can realistically afford. A good rule of thumb according to LendingTree is the 20/4/10 rule: make a 20% down payment, finance the car for no more than four years, and keep your monthly transportation costs (including insurance) below 10% of your monthly income. Remember, just because you can afford it, does not always mean it’s the best financial decision.
2. Improve Your Credit Score
Your credit score can and will significantly affect the interest rate you can get on an auto loan. Check your credit score and take steps to improve it if necessary before you intend to buy a car such as paying down existing debts and keeping overall utilization low.
3. Save for a Down Payment
A larger down payment reduces the amount you need to borrow, which in turn lowers your monthly payments and the amount of interest you’ll pay over the life of the loan. Aim to save at least 20% of the car’s price, but any additional percentage points you can add to that will help lower and reduce the cost of monthly payments.
4. Get Preapproved for a Loan
Getting preapproved for a loan helps you understand what you can afford and strengthens your negotiating position with dealers. Compare offers from multiple credit lenders to ensure you get the best rate.
5. Research, Research, Research
Before setting foot in a dealership, spend plenty of time researching the types of cars that meet your needs and fit your budget. Use online resources to compare models, check safety ratings, and read reviews. There are tons of great resources for reviewing models and even specific car information. Tools like KellyBlueBook, CarFax and more will help you get an accurate understanding of cost versus utility.
6. Consider Buying Used
New cars lose value quickly, losing about 20% of their value as soon as you drive off the lot. Consider buying a used car to avoid this rapid depreciation.
7. Pick a Car Type, Not a Model
Stay flexible about the specific model you want. Instead, focus on the type of car that suits your needs, whether it’s a sedan, SUV, or truck. Most car companies have great options in these categories. Maintaining flexibility can help you find better deals and more options.
8. Shop Online
Use online platforms to compare prices from multiple dealerships. This can save you time and help you find the best deals. Don’t forget to check private sellers and used car websites as well.
9. Expand Your Search Radius
Don’t limit your search to local dealerships. Expanding your search radius can help you find better deals. Sometimes, traveling a bit farther can save you a large amount of money.
10. Get an Inspection
Before finalizing a purchase, especially for a used car, have it inspected by a trusted mechanic. This can help you avoid any hidden issues and ensure the car is in good condition.
By following these tips, you’ll be ready to make a smart, well informed decision when buying your first car. Happy car hunting!