How to Buy Your First Car
You may need a loan and some negotiation skills to land your first car. Here’s everything you need to know about how to buy your first car.
Written by Bonnie Stinson
Reviewed by Kathleen Flear
Table of Contents
- How much should I pay?
- How to pay
- Pre-approval for car loans
- New vs used car
- Picking a model
- Buying from a dealership
- Negotiating
- Final considerations
Load full table of contents
To buy your first car, you will need to create a budget, research models, get a loan, find a dealership, and then negotiate the sale. There are a lot of decisions to make. For a first-time car buyer, the process can be daunting.
We are covering all the essential tips for buying your first car. But remember, once you bring the car home, it’s just the beginning of your new responsibilities as a car owner. As a
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How much should you pay for your first car?
To figure out the right price range for you, start by calculating a budget based on your income and expenses. Make sure to factor in future expenses like maintenance costs and car insurance.
Paying for your first car
For a financing deal, you will need to pay some kind of cash down payment upfront—here’s an explanation of
what makes a good down payment
. You will then make ongoing payments to pay off the principal plus interest. Depending on the institution that holds your loan, you may be able to make payments online, by phone, by mail, or in person.RECOMMENDED
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Know your credit score
Check your score before shopping to understand what loan terms you might be eligible for.
Good credit
means you can qualify for lower interest rates, which will save you money.First-time buyers may not have a long credit history, especially if they’re young. Knowing your score can help you negotiate a good deal with the lender.
Key Takeaway Having a good credit score will usually help you secure a lower interest rate on your car loan.
Cash versus financing
Wondering how to buy your first car? Your first decision is cash lump sum or financing with a loan.
Whether you pay in cash or finance, you will get to take your car home the same day. But the financial outcomes are very different.
Paying in cash for your car is a great option, if you can make it happen. It means you will never have to make additional payments.
Financing means you do not have the full amount upfront, so you will have to take a loan and pay it back with interest. It costs more in the long run. You can get a loan from a bank, a credit union, online lenders, and dealerships.
To lower your overall interest rate, try making a bigger down payment. Good credit can help bring your interest rate down, too.
Should I get pre-approved for a car loan?
Pre-approval is when the bank assesses your finances before you even go shopping. The point of a pre-approval process is to know how much money a bank is willing to lend you. Pre-approval also makes you a "cash buyer" which is helpful when negotiating with dealerships.
This is smart because it helps you understand the range of prices in your budget. In other words, pre-approval prevents you from wasting time test driving vehicles that you can’t actually afford.
How to get pre-approval
Go to your bank or lender to start a pre-approval process over the phone, online, or in person. You will need to provide some information like credit score, proof of income, and more. Shop around to make sure you’re getting the best rate possible.
Does pre-approval affect your credit?
When multiple lenders check your credit within a short period (usually 14 days), it counts as a single credit check. That’s why it is smart to do all your loan shopping at once.
Key Takeaway You can either pay cash for your car or get a loan. Either way, be prepared to negotiate.
Should your first car be new or used?
It depends on your budget and how much responsibility you’d like to assume.
If you don’t know much about cars, a new car might be safer since it’s less likely to present problems. On the other hand, a used car can save you a ton of money—but you should do plenty of research first to avoid buying a
lemon
.Buying a used car
Used cars are much cheaper than new cars. Even a car that is five or ten years old is far more affordable than a brand new car, and you won’t sacrifice performance or serious wear and tear.
You can find used cars from private sellers and dealerships. Make sure to purchase a vehicle history report (
CARFAX
is a good option) and get the car inspected by a trusted mechanic before you buy.Buying new
You’ll pay more for a new car but the shopping process is much more straightforward since there are fewer surprises. Your biggest decisions will be the model and the purchase price you negotiate.
Picking a model
How will you use the vehicle? Think carefully about your long-term needs and the maintenance requirements of the vehicle. Then go online to see how other drivers enjoy the vehicle. Consider cargo space, passenger capacity, and safety features.
Check online filtering tools
Car finder tools like
NADA
can help you discover the right model, if you get lost. Sort by price, body style, brand, and more. Read ratings and reviews
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How to buy from a dealership
If you want a safe car at a great price, dealerships could be the solution. The sales representatives can educate you about the vehicles and dealerships usually offer additional assurances.
Start online
The majority of dealerships have online shopping options. You can review vehicles, speak with employees, and get quotes from more than one lot—all without leaving home.
Take your time to test options
Once you’re ready, take some cars for a test drive. Don’t feel bad about refusing to discuss pricing on your first visit. It’s okay to focus on finding a car you truly like before you begin the negotiation process.
Key Takeaway New and used cars offer different advantages. Do your research and shop around to find the right fit for you.
Negotiating to buy a car
Discuss the overall price, not the monthly price
There are a lot of ways to reduce your monthly car payment, but don’t be tempted to negotiate on the monthly price. Even if the monthly payment is low, the long-term cost of your vehicle could still be exorbitant, especially if you have a high interest rate or there are tacked-on fees.
Instead, focus on negotiating the car’s overall price to bring down the amount of the principal.
Don’t rush
Most people don’t enjoy haggling but rushing is not a good strategy.
It’s your money and you have plenty of time to make your big decision. Sleep on it or bring a trusted friend to help you set boundaries. Dealers will want you to make a quick deal, but don’t let them pressure you.
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Final considerations
Before you sign the contract, there are a few more things you should consider.
Check the fine print for extra fees
Read the contract closely to see if there are any bogus fees. If you spot anything, ask the seller or finance manager for an explanation. Don’t sign anything you don’t understand.
Extended warranties
New cars usually come with a warranty to protect your purchase up to a certain mileage or period of time (usually 36,000 miles or three years). Most dealers will offer you an extended warranty—for a fee. It would cover some unexpected repairs, but you may not need it. Do some research before agreeing.
Shop for insurance
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Time to make it legal! Get the vehicle title in your own name and make sure your license plate is in order. Some dealerships will take care of this for you, but not always.
If you are buying through a private seller, you will need to go to a government office to complete the
title transfer
. Check with your local DMV for help.Buying a car is exciting, but it can also be scary.
Take your time to make sure you are purchasing a safe vehicle, and use
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