The average payment per month for a used car was $503 in the first quarter of 2022, and new cars were sitting higher at $648, according to Experian. As a first-time buyer, numbers this steep can seem to be intimidating and much more overwhelming when you aren’t acquainted with the process. But confidence is about preparation, so take the time before heading online in order to a dealership to know the key steps to consider when purchasing your first car.
1. Determine how much you are able to afford
The key to an effective buy would be to first figure out how much you can afford. Your credit rating, monthly income and the kind of car you want should all factor into this decision. The key is to strike an account balance between fitting your financial allowance and finding a car suitable for your requirements.
When budgeting, consider the out-the-door price, not only the sticker price that you see advertised. The true out-the-door price is the whole cost that you will be likely to pay, including dealer fees and taxes. After you have that number — or perhaps a suitable estimate — factor in your typical salary and make the most of a car loan calculator, which supports you identify exactly what the monthly cost to invest in the automobile will be.
Bankrate tip
Car ownership comes with unexpected costs so be sure you have room inside your budget for any other expenses.
2. Save for a down payment
The down payment for the future vehicle is the initial lump sum payment that you simply pay it off. Try to cover at least 20% of the cost, that might take some time.
Being patient and saving up for a large down payment is probably worthwhile if you're able to delay getting a car til you have the funds. You will save money overall and lower your monthly costs.
If you can’t wait, you may make a lower deposit. However, you may not get a good rate together with your lender. In this instance, think about a less pricey vehicle instead. The less you have to pay overall, the less you will have to save for any deposit.
3. Check out your credit history
If this vehicle is the first large financial investment, it is possible that you simply don’t have a lengthy credit history. If this is the situation, check your credit history to determine which loan choices are available.
Your credit score may be the primary factor lenders consider to determine the interest rates that you'll be offered. The better your credit, the greater favorable your rate of interest is going to be.
Check your credit rating before speaking with a potential dealer. That can be done online through Experian or free at AnnualCreditReport.com. It's worth waiting to get your credit who is fit before applying for vehicle financing if you can.
4. Decide what car suits you
Choosing which vehicle is the best for you requires a lot more consideration than simply color or style. Consider other factors, like the vehicle’s durability, size for your needs, technology, safety features, gas mileage and also the weather where you reside. Check out Edmunds and Prizes of these stats — and additional information on how much the vehicle you are interested in typically sells for.
This is also a good time to find out if you prefer a new or used vehicle. While a brand new car is exciting, certified pre-owned (CPO) can give you a lower price tag while still boasting new features along with a manufacturer-backed warranty. And if you aren’t in a bind to obtain driving as soon as possible, you can save money by awaiting seasonal sales or deals.
5. Prequalify for financing
After you gather some good info around the kind of vehicle you wish to buy and your financial history, apply with lenders that offer prequalification. This task is essential to saving cash and putting you in control with regards to finding the right financing option available.
Prequalification, or preapproval, is different from full approval, so even after the prequalification process ends, it’s not a done deal. Rather, preapproval will give you a concept of potential rates and terms. You still need to complete a proper application after, but you will have an idea if you're able to afford it in advance.
You will need the next when you apply to prequalify:
- Average income and finances.
- Personal information.
- Employment information.
- Any current debt.
6. Go to the dealership — personally or online
After prequalifying for a loan and setting your sights on your dream car, it's time to begin the car buying process. Ideally, you should use the internet to see what vehicles are available in your area. Most dealers have their inventory for auction on their websites and permit you to definitely set up appointments.
It is important to obtain behind the wheel of your potential car and take it for a test drive before you purchase. Make sure to adjust the seat, measure if it fits in your garage and may handle your day-to-day routine.
But you aren't restricted to the dealers local to you. Online dealers like Carvana, TrueCar and Vroom give you use of a national inventory of used cars. You are able to browse and get financing without leaving the house, and when you pick an automobile, you receive up to and including week to check drive your car and have it inspected with a mechanic.
7. Negotiate
Negotiation can feel intimidating but obtaining the cheapest price is dependant on being bold yourself. Come prepared with any paperwork needed, a firm understanding of your credit report and also the right questions you should ask. However the bottom line is this: be prepared to leave if you can’t get the deal you deserve.
When it is now time to close the offer, remain steadfast on the agreed-upon number. You may expect the dealer to push for further fees and add-ons. Say no to options like fabric or paint protection when an add-on like gap insurance might be more useful.
Next steps
Negotiation can feel intimidating, but getting the best deal is dependant on being bold yourself. Come prepared with any paperwork needed, a strong understanding of your credit report and the right questions to ask. Focus on the cost, not the payment per month. And become prepared to leave should you can’t get the deal you deserve.
When it is now time to shut the deal, remain steadfast around the agreed-upon number. You can expect the dealer to push for further fees and add-ons. Say no to options like fabric or paint protection when an add-on like gap insurance might be more useful.
