Few buying decisions in your life matter more than the purchase of a car. Outside of your home, it’s probably the largest single purchase you’ll ever make. But as a first-time car buyer, navigating this process can be quite intimidating.
5 Tips for the First-Time Car Buyer
Buying a car can be stressful. There’s a lot on the line – including money, safety, reliability, and other factors that will impact your life daily. As a first-time buyer who has no experience with the buying process, it can sometimes seem like too much. Take the process slowly, do your due diligence, and keep the following tips in the back of your mind.
- Determine Your Budget
The first step is to determine how much you can afford to invest in your car. While there’s no perfect formula, there are some different rules of thumb you can use to come up with a figure that you feel comfortable with.
One of the most common methods is the 15 percent strategy. This strategy says that your car payment should be no more than 15 percent of your monthly take-home pay. In other words, if you bring home $4,000 per month, your car payment should be no more than $600 per month. Other people prefer a more conservative 10 percent rule. Then you have those that only buy what they can afford to pay for in cash.
- Buy Used
There’s a time and place for buying a new vehicle. Sometimes the dealer incentives and manufacturer warranties make it a good deal. However, for your first vehicle, a used car may be a better value investment.
On average, a new car loses roughly 19 percent of its value in the first year of ownership. By purchasing a vehicle that’s one or two years old, you can save money and enjoy a car that’s still relatively new.
- Understand Values
As a car buyer, you need to have an understanding of how much a vehicle is worth before you go shopping. Thankfully, this is fairly easy to do. Kelley Blue Book is sort of the gold standard when it comes to pricing. Play around with their pricing tools to figure out just how much a car is really worth. You can even print the readout so that you have the facts and figures for negotiating prices.
- Have the Vehicle Inspected
When you find a vehicle that you like, it’s always a good idea to have it inspected by an independent mechanic who has no stake in whether you purchase the vehicle.
A mechanic will look over the vehicle, check the main systems, and let you know if there are any major maintenance items that will need to be done in the next few thousand miles. They can also look for signs of accident damage that may not have come back on an accident report.
- Think About Resale Value
The average length of car ownership in the U.S. is 79.3 months – or right around 6.5 years. In other words, no matter how much you love the car you’re buying, it won’t be the last vehicle you buy. And having said that, you need to buy with resale value in mind.
Certain brands, models, and types of cars have higher resale value than others. Do a little digging around to see what’s out there. If you’re deciding between two different vehicles and one has a significantly better resale value, then it might make sense to buy the one that gives you the biggest return.
Don’t Rush Your Decision
If you could remove certain external factors and buy a vehicle in a vacuum, it would be fairly easy. You would have the time to search for the right car, identify the optimal price, negotiate a deal, and sign the dotted line – at your pace. Unfortunately, the car buying process doesn’t happen in a vacuum. At any given moment, there are hundreds of other people looking for the exact same vehicle as you. If you let it, this pressure could lead to a hasty decision (in fear of missing out on a deal).
The key is to remain poised and disciplined. There’s never just one vehicle that’s right for you. Take your time and you’ll eventually end up with a car that fits your budget and serves you well for years to come.