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How Do You Buy Your First Car?

After a house, a car is the biggest purchase that most people make. It's also one of the most important.

But it can be stressful, confusing, and overwhelming. How do you get the money? Do you need a loan? What car should you buy?

This guide will help you through the car buying process and tell you everything you need to know.

How Do I Buy My First Car?

The worst thing you can do when buying your first car is to act on impulse. Don't simply invest every cent you have and take the first car that you see.

You're going to be driving that vehicle for a number of years. It will take you to school or work; you'll use it to help your friends move home or embark on a road trip. You have to live with all of its faults and pay for every issue that arises.

Take your time. Remain patient.

Once you have that step nailed down, consider the following:

Step One: Decide Whether to Buy a New or Used Car

In 2016, the average selling price of a new car in the United States was less than $35,000.

Far from a modest sum, but a reasonable one when you consider how many miles those cars cover and how much convenience they provide.

By 2020, the average price had jumped to $40,000 and just a year later, it had passed $45,000.

Those prices are still climbing and with every passing month, they are pricing more consumers out of the market.

Most first car buyers are under the age of 25 and earn an average salary of between $40,000 and $50,000.

Of course, few first time car buyers purchase their vehicles outright, but with such a hefty purchase price, the monthly car payment and down payment are also substantial.

The down payment alone could be $8,000 to $10,000 (assuming a payment of 20% is made), and you could be paying upwards of $600 a month on top of that.

That's before you consider the fuel and insurance costs.

Unless you're in a very fortunate financial position, it's unlikely that you can afford a new car.

A used car might be a better option, but it's not without its issues.

Used cars lose less of their value at the point of purchase and have a much more reasonable purchase price. But they also cost more to maintain and are more likely to encounter problems.

When thinking about buying a used car or new car, consider your finances closely and weigh up the pros and cons.

Step Two: Get Your Finances in Order

There are a few simple facts to keep in mind when planning your car purchase:

  • As a young driver, you may not have a strong credit history and could struggle to arrange financing. If so, seek help from your parents (they can cosign the loan) or speak to a bank or credit union about getting a loan.
  • The bigger the down payment, the lower the interest rate. You could save hundreds or even thousands by saving for a larger down payment.
  • If you can buy a decent used car outright, consider doing so. You won't have to worry about credit checks and interest payments and the car will be 100% yours from the outset.
  • The longer the loan payment period, the more you will be charged over the duration. Rather than focusing on the option that has the smallest monthly payments, think about how much you're paying over the duration.
  • Always read financial agreements closely and make sure you know what you're getting yourself into.

Last but not least, remember that your down payment and monthly payment are not the only expenses that come with owning a car. You'll need to think about gas, insurance, and maintenance, all of which seem to be rising right now.

If you stretch your budget thin just to get a bigger, flashier, or newer vehicle, you may find that you can't afford to actually drive it anywhere.

Step Three: Consider Your Needs and Not Your Friends

Many first time car buyers make the mistake of buying a car that will accommodate or impress their friends. But your friends won't be paying the bills and no one cares what everyone else is driving.

Your priorities should be:

  • Will it get me to where I need to go?
  • Can I afford the fuel costs and maintenance?
  • Will it accommodate my family?
  • Does it have the features that I need?

If you live in a busy city, it doesn't make much sense to have a gas-guzzling muscle car. If you make regular long journeys, you'll want something that is comfortable and reliable.

Step Four: Do Your Research and Test Drive the Car

Don't buy a car on sight alone. Research into the vehicle's history. Check online reviews. See what issues people are having now and what issues they have had in the past.

Does it have the latest safety features? Is it reliable?

A test drive is essential, as well. If you're buying a car from a dealership, you can drop by at a time that suits you and arrange for a test drive.

If you're buying from a private seller, schedule an appointment, make it clear that you would like to test drive the car, and then spend the interim period researching the make and model.

That way, you'll know what to expect and if it's operating as it should.

When buying a used car, inquire as to whether it has ever been in a crash, how many miles it has done, and whether there are any issues you need to be aware of.

Step Five: Get the Best Deal

There are a few things you can do to ensure you always get the best deal on a used or new car:

  • Don't be too eager. If you really like the car, don't make it obvious. There are lots of other vehicles out there and no guarantee you will buy theirs.
  • Don't assume that the salesperson is being honest or has your best interests at heart. Contrary to what they tell you, they only care about the sale.
  • Shop around. Don't just stick with your local car dealership. There are many private and commercial car dealers operating in every major town and city.
  • If you have any concerns, mention them. It shows the seller that you're not an easy target and may force them to lower their price.
  • Set a realistic budget and negotiate to get the cheapest price. If you can't get a good price or think they are playing hardball, just walk away.
  • If you can't get approved for a car loan and don't have anyone to cosign, take a look at your credit report and spend some time improving your credit score.

Step Six: Complete the Sale

The final step is to sign the paperwork, make the agreements, and complete the sale.

If you have an auto loan, check the terms and conditions closely and make sure you know what you're signing.

Don't rush this process. You have time to read, reflect, and change your mind.

If you're buying a used vehicle, you'll need to transfer ownership. The process differs from state to state, so check with your local DMV.

Make sure the seller hands over all documents associated with the vehicle, including inspection stickers, emissions test documents, and the owner's manual, if available.

Is it Hard to Buy Your First Car?

It's not an overly complicated process. The problem is that you're doing it for the first time and being introduced to processes you know nothing about. There is also a lot of money at stake, and that can make it stressful.

It's important to take your time. Be patient, and do your research. Don't sign anything until you're ready and are convinced that you’ve made the right choice.

FAQs About Buying Your First Car

Still have a few questions about buying your first car? Here are some of the most commonly asked questions:

How Much Money Should You Save Before Buying Your First Car?

It depends on what car you're buying, whether it's new or used, and how big the down payment is. Most first time buyers save a few thousand dollars to adequately prepare them.

The more you have, the easier this process will be.

For instance, with $10,000, you have all options on the table, from buying a used car outright to getting a new car with a substantial down payment. Even half that amount will be sufficient for most purchases.

What is the Best Car For a New Driver?

Small, affordable, and reliable vehicles are best for new drivers.

Compact cars like the Honda Civic and Kia Soul tick a lot of boxes. Larger cars like the Toyota Prius and Toyota Camry are also great options for new drivers.

Is it Worth Buying a New Car as a First Car?

If you have the money and don't want the hassle of regular trips to the mechanic and potential breakdowns, it's worth it.

But new cars are expensive and they rapidly depreciate. Most new cars lose 20% to 30% of their value within the first year.

If you're dropping $40,000 on a new vehicle, it could be worth as little as $28,000 by year 2, and it's all downhill from there.

What if I Can't Afford to Buy a Car?

If you can't afford the down payment on a new car, consider leasing a vehicle. It's not the most cost-effective option in the long term, but you don't have to worry about upfront car payments and simply pay a fixed sum every month.