You’ve finally saved enough coin to ditch that clunker and buy your first new car. Before you hit the dealership, be sure you know what you are doing to ensure you get the vehicle you want at a price you can handle.
Here are some tips for first-time car buyers.
Make A Budget
One of the first things you should do is establish a budget. Doing so will help you winnow the prospects down to vehicles you can afford before you go gaga over a ride that will render you broke.
Creating a budget involves adding up your monthly income and expenditures, separating fixed expenses such as rent and utilities from discretionary outlays such as going to the movies or buying new gear. In the process, you will probably notice some things you can drop or cut back on to have more cash for your monthly car payment.
The general rule is to make sure your monthly car note is under 10% of your after-tax pay. You will also need to consider other ongoing expenses including gas, repairs, insurance, and maintenance.
Loan terms are another important consideration. These generally range from 36 to 84 months. While a longer-term loan will give you a smaller monthly payment, you will fork over more in interest over time. With that in mind, you should avoid financing a car for longer than 60 months. You’re looking at a car that’s outside your range of affordability if you need to go longer to make the payment fit within your cash flow.
Look Into Financing And Purchasing Options
Unless you have enough bucks to buy your car with cash, now it’s time to mull over financing, which you can secure through an automotive dealership or a bank. The latter will often get you better terms than the dealer, which might tack on loan fees.
The best move is to get pre-approved through a bank or credit union, this will give you some negotiating leverage at the dealership when you’re offered to finance. If they can beat the deal you already have, you’ll save money. Even better, you’ll save money if they cannot too. Run a search for first time car buyer programs near you to find a lender willing to take your newbie status into consideration.
Get Your Credit Up To Snuff
Knowing your credit score will give you an idea of the loan terms for which you’ll qualify. Having a FICO score of at least 700 makes it easier to get lower interest rates. If your credit score needs work, and you can postpone your car purchase, do so.
Get Your Down Payment
For a new car, most lenders prefer a down payment that is at least 20% of the purchase price. The larger the down payment, the smaller the loan you will need. Also, a healthy down payment can get you happier loan terms, which will save you money.
Negotiate The Price
You will have more haggle room with a used car since there is no manufacturer’s suggested retail price involved. However, you can usually bargain your way to substantial savings in either case. If you can wait until the end of the year to shop, you can likely take advantage of special promotions.
Scour The Contract
Buying a car is exciting, but it’s important to read the contract carefully. Take as much time as you need, or even call a trusted friend for advice. Always ask the dealer questions about anything about which you need clarification. These tips for first-time car buyers will help you purchase your new vehicle with confidence. You’ll get a price you live with too.