Purchasing a new car, for the first time or the 10th, can be daunting. Besides a house, it’s probably the most you’re going to pay for any single item, it’s going to be with you for years and, depending on your commute, you might be spending hours with it every day. It’s important to get it right. Here are 11 tips to help you on the way.
1. Buy used
While everyone loves that new car smell, used cars are generally going to be more economical. Cars suffer the most depreciation in the first few years — including a big drop the moment the vehicle drives off the lot — so the goal is to find one that’s a year or two old and in good shape. Let someone else will take that big initial loss. Yes, buying new will allow you to customize it with the extras you like and in the color you want, but with a bit of luck and shopping, you can likely get most of those features in a used model. This is especially true right now, because there is an unusually large number of used cars on the market.
2. Have a budget and stick to it
Ideally, you should buy a car outright, if you have the financial reserves.
Otherwise make a realistic budget that includes how much you can make in a down payment, and how much you can afford in monthly car payments. You might want to play around with an auto loan calculator, which can help you figure your monthly payments. Change the loan amount to see how much you can save each month if you make a larger down payment. If you don’t need the car immediately, save some money for a larger payment up front in order to lower the costs in the long term. Also be sure to look at the length of the loan. A longer term will mean smaller monthly payments, but it will end up costing you more in interest over the life of the loan.
Remember that the price you see may not include taxes and other fees. And don’t forget associated costs such as insurance (most insurance companies will give you a quote before you buy if you have a couple of models in mind), registration, maintenance, parking and gas.
(Be sure to shop for insurance as well. Here’s a great place to compare rates and terms.)
3. Arrange financing
If you’re one of the lucky ones who doesn’t need a loan, you can skip this step. Otherwise, it’s best to arrange for your loan before you go in. Doing so affords you the time to shop around for better terms, and lets you make a decision without a high-pressure salesman sitting across from you. If the dealer can make you a better offer, that’s great, but it’s best to have options.
A good place to get started comparing car loans is here, in our Solutions Center.
4. Determine your needs
What’s this car for? How many people will it be transporting, and how far? Are you going to be in a city where parking necessitates a smaller car? Will you need to hitch something to it? Make an honest assessment of your bottom-line needs.