Expert Tips for Buying Your First Car
October 29, 2012 | NerdWallet.com
Laura Edgar is a senior writer for NerdWallet.com, an unbiased personal finance website dedicated to helping you make smart financial decisions.
Thinking about buying a new car? If this is your first one, you're probably pretty excited and maybe even a little stressed out. Not to worry: if you do your homework first, we guarantee that you'll have a fabulous buying experience. The nice thing about buying a new car is you can get all the information you need in advance. Read on for more expert car buying tips.
Know how you'll pay for it
Cars are expensive, obviously, and if you're like most people, your savings account balance is nowhere near the full cost of a new car. You'll probably need an auto loan, but even so, you'll have to have some money saved up for your down payment. You'll also want to go through your budget and make sure you can afford several hundred dollars a month for your payments. No new car is worth it if it puts you in debt. If you have bad credit, or need financial assistance, you may want to consider other options.
Consider a co-signer
Not everyone can qualify for a loan by themselves. If you're a college student or young adult that hasn't built up a credit history, you'll probably need a cosigner (with good credit). You can piggyback off their score and qualify for a better rate on your loan, but they'll be responsible if you can't make your payments. Make sure you both are clear on what will happen in case of an emergency.
It's okay to buy it used
Did you know that most cars lose 60% of their original value within 5 years? A five-year-old car may not have the latest and greatest technology, but it's also new enough to not have major problems. A used car is a great deal! Just make sure you buy one that has a maintenance history and, ideally, a Carfax report. Be sure to look up your desired make and model's Kelley Blue Book profile, too. This will help you figure out if you're getting a good deal when someone quotes you a price.
Minimize the bells and whistles
Gotta have those leather seats? How about that sunroof? Maybe, but then again, maybe not. All those add-ons add up, so if you're willing to live without it, it's best not to get it. You'll be able to save more money if you're willing to make some small sacrifices. For example, you may be able to buy a car in an unpopular color for a reduced rate. Whether that's worth it, of course, is entirely up to you.
Buy it, don't lease it
Personally, we don't see any point to leasing a new car, even if your monthly payments are lower than your potential loan payments. Leased cars come with some pretty heavy restrictions like mileage limits and termination fees. You might not even be allowed to move to another state before your lease is up. Plus, after investing all that money, you don't even get to keep the car.
Everyone says it because it's true: the sticker price is not the purchase price. Most sellers expect you to talk them down. In fact, most are willing to bring the price down 10-15%, so there's no reason not to negotiate. If you're not a natural haggler, take a buddy with you. You deserve the best price possible.
© 2012 Alliant Credit Union. All Rights Reserved.