A lot of first-time car buyers are often confused about buying their first automobiles. They are explicitly confused about the car’s budget and the value they can get from such vehicles. Every first-time car buyer wants a car that will last for several years; hence they seek advice on the best brands that offer the most value. Whether you are purchasing a new vehicle or a fairly used one, it is essential to know your desire specs and how such specs can fit your budget.
So, How Much Should You Spend on Your First Car?
It varies, but one general rule is that you should spend no more than half of your gross annual income on your first car. On average, you should consider between a quarter and a third of your gross yearly salary.
How To Buy Your First Car – A Guide
Perhaps the first thing you should do before setting out to buy a car is to identify your need for the vehicle. Do you need the car to go to work or business every day? Do you need the car primarily for a weekend adventure? What is the weather situation like where you reside? Is it snowy principally, raining, or humid?
Providing answers to these questions will help you discover the specs or options you should watch out for in the car you want to buy.
There are situations where you may not need a car for now, especially when there is free or cheaper transportation to your work. Your children can also get more affordable or accessible transport to their schools.
The next step after considering the purpose of buying a car is to think about budget and financing. Budgeting considerations don’t end with the prices of vehicles; they also include; Maintenance servicing, insurance, gas purchase, repairs, and even parking.
You should also consider the car’s financing, especially if you are taking a loan that attracts significant interest. Though a down-payment is not always a requirement to get a loan for a car but making one is always a good idea because it can reduce the interest rates in the long run. In the US, for instance, the total amount repayable on car loans drops by between $10 and $15 for every $1000 down-payment you make.
The next step you must take is to compare your options. The internet, for instance, offers a wide range of credible dealers or sellers to explore. Some dealers may ship for free, and others ship for a fee; you should compare the prices of the same car and other brands from different dealers.
You may also want to consider the online auto rankings to compare your choices. If you buy new cars, you should request quotes, especially on add-ons such as safety features and entertainment options. If you purchase a refurbished or fairly used car, you should order for vehicle history, including mileage and accident history.
Checking your credit score before you purchase a car is also an important step you must take. You must know your credit score because it determines the interest rate you will pay on your car loan. Therefore, having a better score will help you get a better deal, eventually affecting your budget for a new car.
Your credit card provider should be able to provide your credit score for free. If your credit score is low, you may leave some time to improve on it before you take a car loan. On the other hand, if you are not in a hurry to purchase a car, improving your credit score is always a great choice.
Other Steps To Take To Buy Your First Car
Now that you know your credit score identify your needs for a car, preparing your budget and financing, and compare your options, you should now be ready to start the car loan process.
To take the right loan, you must also conduct some research because it will give you an idea of how much you can borrow and interest rates. With this information in your head, you don’t have to struggle to find the right dealership to purchase a car.
You may also consult your bank or credit union before getting quotes from other lenders who may also help you. You will indeed find the best rates when you compare all these options.
The next step after taking a car loan for your first car is to take a test drive. It would be best to narrow down your lists of vehicles that fit your specifications and budget before now. Then, you can take as many of these cars for a test drive to see how it feels and how they perform.
Try as much as possible to drive all the shortlisted cars on the same day so you can compare them. In addition, you should call the dealership ahead before test-driving. Giving a call ahead of test-driving will help you structure the day and evaluate the customer service of each dealership.
Close the deal once you have settled for one of the cars you test-drove. It would be best if you also had your financing in place before closing your sale. At this stage, you are in control, and you can fully negotiate with the dealership. Make sure you understand the terms and conditions alongside the warranty conditions.
You may want to sign up for an automatic car loan repayment billing to avoid missing out on your payments.
Common Mistakes First-time Home-Buyers Make
There are subtle errors many first-time car owners make, and they are unaware of such. For instance, not shopping around but relying on words of mouth is one error that can cost you a lot of money when buying your first car.
Depending on your location, there could be dozens of new and used car dealers ready to offer you great prices; hence you should not jump on the nearest one.
Read online reviews and opinions and compare such dealerships with those recommended by people you know before comparing prices and settling for one.
Accepting the more extended-term financing is another error many first-time car buyers make. For example, instead of going for the 36-month car loan payment period, some will spread it to 72 months because they want lower monthly payments.
While the longer term will lower your monthly repayments, the danger here is that you will end up paying more on the car. For example, for a $25,000 car spread over 36 months at the interest rate of 7%, you will end up paying $27,789, but you will pay up to $30,688 if you spread the same loan over 72 months, which is almost $3000 more.
To save even more money, you should consider buying a less expensive car or a fairly used one. Alternatively, you may want to save more to have a more significant down payment and a shorter loan repayment period.
Not test-driving a car before buying it is another error you must avoid, especially when buying your first car. One of the best ways to narrow down your lists of preferred cars is to test-drive each one of them.
You will discover that two similar cars can vary considerably in performance, ride quality, cabin noise, and many more. These factors can contribute to maintenance costs. So be sure that the vehicle that gave you the best performance and quality is the one you settle for in the end.
Assuming the new car is always better is another error many first-time car buyers face. Some pretty used cars still retain their value for a longer time than some new car brands.
New cars can be more expensive, but they often suffer from a higher first-year depreciation. Therefore, new cars will also require a more expensive insurance package. On the other hand, since fairly used cars have already depreciated, they will eventually suffer less future depreciation than new cars. Therefore, used cars also require much less insurance coverage.
Many used cars that have already recorded more than 60,000 mileage may last longer than another 200,000 mileage when adequately maintained. As a result, first-time buyers should enjoy several benefits that new cars may not want. In addition to saving you thousands of dollars in cash and reducing total loan repayment terms and interest rates, fairly used car sellers will provide you adequate information on the car’s history.
Buying your first car should not be a hassle, mainly when you stick to this guide. However, you should not just assume that the dealers always have an advantage over you. When you believe that the dealers have a financing edge over you, you will become nervous.
Dealers may offer fewer financing options, no doubt, but the auto market has become so big that even people with poor credit can get good deals for decent financing. Moreover, a good dealer must be willing to have a satisfied customer who can recommend others to him; hence he will provide you more flexible financing options.