Ready to begin the process of buying your first car? You’re in the right place!
Cars are a part of life. Without a car, it’s hard to do little things like buy groceries and commute to work.
Unfortunately, cars are also expensive, and there is a lot that goes into the purchasing process. It can be especially difficult for millennials who have never purchased a car before you know what to do.
If you’re thinking about buying your first car, consider these 9 steps before you sign on the dotted line.
1. Create A Budget Before Buying Your First Car
Before you even think about buying a used car, figure out how much you can realistically afford. Most financial planners recommend spending less than 15% of your total budget on a car payment.
Don’t have a budget? Yeah you’ll need to read this blog post first to create a smart budget.
Once you’ve got your budget created, see how much money you have left to spend on a car. Oh and you can figure out your estimated car payment by using this calculator.
Note: Don’t forget to include the cost of insurance in your budget either.
Yeah, I know, it really adds up!
2. Research More Than One Model
I know you’re already saying that special car of your dreams. But before you make up your mind, open your eyes and look at other makes and models first.
Every make and model is different. Specific years even have their own pros and cons.
Before you make a purchase, research at least three different makes and models. Pay special attention to each vehicle’s weak points, repair costs, and resale value.
When you’re done, compare and contrast these statistics to help you make your purchase.
If you’re unsure where to start, two of the most popular vehicles for first-time car buyers are the Honda Accord and Toyota Corolla. Both vehicles are affordable, good with gas mileage and have low repair costs.
3. Find Vehicles For Sale Everywhere
There are a number of places you can find used cars. Each has their pros and cons. Do you want to save a lot of money? Then buy a car off eBay or Craigslist. Do you want it to be easy? Then go to a dealership instead.
New car dealerships offer a range of new and used vehicles, while independent dealerships tend to offer a selection of used vehicles of different makes and models.
Dealers and individual sellers are both open to negotiating the final price. The exception would be Carmax and Autonation, which offer you their lowest price right off the bat and leave no room for negotiation.
You’ll want to check all the hot spots first: cars.com, autotrader.com and truecar.com. Next, try Craigslist and eBay. Finally, head over to a local dealer once you are knowledgeable about what prices cars are going for.
4. Understand Certified Pre-Owned
Some dealerships sell certified pre-owned vehicles at a higher price point. While these vehicles often come with an additional warranty, it may not be worth the markup. For example, while Honda and Toyota have extensive certification programs, other certified vehicles are nothing more than retired rental cars.
A certified pre-owned vehicle will cost you roughly $1,500 more. An alternative option for you is to buy an extended warranty instead, which should be cheaper.
5. Check The Vehicle’s History
Always get a vehicle history report before you purchase a used vehicle. These reports will tell you if the vehicle has ever been totaled or had the odometer rolled back.
If you’re dealing with a friend or loved one, it can be tempting to skip this step. Don’t. You may learn information that the seller didn’t even know.
6. Contact The Seller
If you’re buying a car from an individual seller, a preliminary phone call will help you gather information about the vehicle and build a relationship with the seller.
During the conversation, ask the seller about the car’s history, present condition, and reason for selling. These questions may reveal information that was not listed online.
This conversation also offers an opportunity to size up the seller. Do they sound shifty or honest? Are they willing to answer your questions, or are they giving you the runaround?
Remember that when you buy a car from an individual, you are taking a huge risk. Cars are sold as-is so there are no returns or refunds, even if the car breaks down on your way home.
7. Inspect The Vehicle
When you’ve narrowed the search to one vehicle, arrange a test drive. This is the best way to determine if the vehicle is right for you. During the drive, pay attention to the vehicle’s brakes, acceleration, transmission, and power steering.
If the drive goes as expected, you should arrange for an official inspection. Just because the car drives good doesn’t mean there aren’t issues you can’t notice. Most mechanics will offer a pre-purchase inspection for around $100. You shouldn’t buy a used car without an inspection.
8. Negotiate A Fair Price
Never settle on the sticker price. Most sellers expect to haggle with their buyers so they list the car for a few thousand dollars more than their minimum price.
When ready, make an offer that’s lower than the average resale price for the vehicle. The first number you throw out there will be the starting point of the negotiation, so you don’t want to start too high.
The seller will make a counter-offer, and you will go on from there until you arrive at a price you’re both comfortable with.
9. Don’t Be Afraid To Finance
Many how-to guides will encourage first time car buyers to avoid financing your vehicle at all costs. Obviously it’s best to save up your money and buy a car without a loan.
But we also have to be realistic. Millennials who are recent grads are saddled with student loan debt and will need to start putting their degree to good use right away. If you will use your car to go to work, then your car is crucial to you making money.
If you have above average credit, it is entirely possible for you to get a loan with an interest rate of 4%. Using that example, you could borrow $10,000 and end up paying back $11,000 total after 5 years. That’s just $200 per year in interest, not bad at all.
Do you have any tips you can share with millennials about buying your first car?