Buying your first car is a big milestone in life. You can already envision the moment when you get the keys to your very own vehicle — a mixture of triumph, excitement and satisfaction. But first you have to clear some hurdles standing between you and your dream set of wheels.
Namely, you still have to navigate the car buying process from start to finish. Doing your research ahead of time can not only help you do so with confidence and a clear mind, but also can potentially save you hundreds or thousands of dollars along the way by helping you avoid costly mistakes.
Here are some things a first-time car buyer needs to know before even visiting a dealership.
Make a Budget Before Shopping Around
It’s a tale as old as time: Your eyes lock on the most beautiful vehicle you’ve ever seen, and the rest is history. The issue? Your monthly payments end up being more than your budget can comfortably support. This is the problem with trying to fit your budget to a certain vehicle rather than vice versa.
Make a detailed budget outlining your income versus your monthly expenditures. Calculate exactly how much you can consistently devote to a car payment and how much you can afford to put down.
As CNN Money recommends, you should anticipate spending 10 to 15 percent of your total monthly budget on vehicle expenses — including loan repayment, repairs and insurance premiums. Any vehicle that eats up more of your budget than that is generally too costly.
Outline Your Needs from a Vehicle
Another way to fight impulsive car-buying decisions is by walking in with a firm idea of your ideal models rather than letting your eyes wander on the dealership lot.
Here are some key questions to ask when honestly assessing your vehicle needs, according to Edmunds:
- How many people will be riding in the car?
- How important is fuel economy for your commute?
- Do you live in a climate necessitating all-wheel drive?
- What safety features are important to you?
- How much cargo do you need to carry?
- What entertainment and comfort features do you want/need?
Start with the non-negotiable needs, like how much passenger and cargo space you realistically need. Then move onto your wants — those features you’d appreciate but could sacrifice if need be.
Look at Total Price, Not Monthly Payments
A word of advice to the first-time car buyer: Look at total price rather than monthly payments. Why? Because dealerships might be able to get payments on a certain vehicle to fit your monthly budget — by extending the term of your loan as long as 72 or 84 months. So, though the payment seems affordable, you’ll be paying more much longer and will end up spending much more in interest over the life of the long loan.
Here’s an example from Autotrader: Paying $400 monthly for 60 months comes out to $24,000. But paying $400 monthly for 72 months comes out to $28,800. For 84 months, the same payment would cost you $33,600. The monthly payments appear the same at first glance, but the total costs end up being much different.
Consider All Your Financing Options
Did you know you don’t have to apply for a loan through the dealership? It’s oftentimes convenient, but you can absolutely get preapproved from other banks, credit unions or online lending companies before even stepping onto a lot. Shop around so you know what interest rate you can secure based on your credit history. This way, you’ll walk in holding the cards rather than operating at the mercy of the bhph dealers.
Knowledge is power as a first-time car buyer, so do your research ahead of time to position yourself for success. Good luck!