Welcome to First Things First! This series will help you prepare for a range of life changes. Think of each installment as an instruction guide that will either give you time to locate a safe landing spot or help you hit the ground running. Each article will contain a handy checklist you can reference so you can remain calm, cool, and in control of whatever life hands you.
Getting Your First New Car
The good thing about getting your first new car as an adult is you can make all the choices about what you want for your ride. We’re not talking some used high mileage hand-me-down your older sister drove or some aging and gray mid-sized sedan with a cracked fender. We’re talking about a brand-new car from the current model year – and it’s all yours.
On the other hand, the bad thing about adulting is that you are responsible for paying for your that car – and anything that might happen to it in the future. The first REAL step in this car-buying process? Determine how much you can afford! And that includes taking care of it plus being painfully aware of what it costs you to drive it. (Yep, successful adulting continually requires this tiresome responsibility.) So, let’s get you in gear to happy motoring by showing you the road to buying your first new car.
1) Choose the Vehicle that Actually Meets Your Needs
You may be in love with a sporty coupe or a features-laden SUV, but when you’re shelling out thousands of dollars, you need to step back, take a deep breath, and figure out what you need – NOT what you want. Start out by putting together a list of vehicles to compare that fit your transportation needs. Once you’ve done that, start getting information on prices so you know what to expect.
2) Narrow Your Choices by Comparing Options
Manufacturers websites show which vehicles come with what option packages. Surprisingly, car manufacturers will bundle some option packages and limit them to specific models. For example, say you want a car with GPS, satellite radio, backup camera, and sky blue with white interior. Unfortunately, the option package with GPS and satellite radio only comes with the silver gray model. You can get the features you want in the color you want, but only if you upgrade to the next model class up — which costs more money. Going with what you need in this case will save you way more money, especially when you factor in loan interest.
3) Learn How Much Fuel and Maintenance Could Cost
Of course you’re aware that just driving a car costs money. Different model cars in the same class have their strengths and weaknesses. For example, while manufacturer’s Model A may get great gas mileage, it might rely on expensive filters, bolts, or special proprietary washers. Meanwhile, other-manufacturer’s Model B might get 5 miles less per gallon, but because it shares parts with 5 other models, the parts cost a whole lot less. Over the course of the next several years, those basic maintenance parts costs will add up.
Read LOTS of car reviews and pay attention to performance reviews. Estimate your monthly mileage and see how that adds up when you drive one of your prospective cars. Be aware that newer engine and oil technology don’t require oil changes every 3,000 miles. Oil life monitoring systems are part of many new cars and many will flash a warning at about 5,000 to 8,000 miles, reducing your cost.
4) Determine Insurance Costs
Not all cars are built the same, drive the same, or can be repaired the same. That’s why insurance rates differ from car to car. As you narrow down your car choices, start getting insurance rate quotes. This will give you a range of costs you can use to get a clearer estimate of how much car you can afford. Having it set up before you bring the new car home will also reduce the headache and stress.
5) Research How Much the Loan will Cost
One of the first things you need to do is find out your credit score, as this tells lenders what sort of risk you are. The higher your score, the better interest rate you might be able to get. Your car loan costs will depend how much the loan is for, the length of the term (most car loans tend to be for 60 months/5 years), and the interest rate.
At the Dealership
Despite stereotypes, very few car dealers are scummy scam artists because they want your return business (and your recommendation to friends and family). Dealer are also currently aware of several important buying trends:
- On average, buyers hold onto their new vehicle for 6.5 years — that factory warranty for servicing and keeping your car reliable helps their business.
- Connectivity and changes in the “info-tainment” space in vehicles is convincing drivers to upgrade their rides.
- Millennial car buyers are more likely to lease a car than Generation X and the baby boomers.
That said, some dealer operations do employ some cheesy, if not out-right sleazy, tricks when you arrive in the showroom. While it seems convenient to arrange ALL the financial rates and terms at the dealership, you actually give them the opportunity to tack on all sorts of fees and additional costs. That’s why the BEST thing you can do is to isolate parts of your car deal:
- Sell your old used car somewhere else (such as Craigslist) or even consider donating it for a tax write-off.
- Know your credit score
- Work out a car loan in advance with your bank or credit union.
By taking control of trade in value, loan terms, and monthly payments away from a dealership, you actually get more control over each part of the purchase process and can potentially score a better deal. You can comparison shop between dealers far more effectively. Just entering the dealership and telling the sales agent that you already have financing arranged tells them that you’re more than prepared to look for the best offer. They can start bargaining, or you’ll leave.
Test Drive Tips
- Bring a legible photocopy of your license. This way the dealer can verify your identity and has a record for insurance purposes without delaying your license’s return so they can market at you some more.
- Make sure you drive the same kind of car you want to buy.
- Ask the sales person to demonstrate any unfamiliar features, including location of dip stick and filters in the engine compartment, the AC controls, the gas tank release, and more.
- Sit in all the seats. Are they comfortable? Do you have enough headroom?
- Sit in the driver’s seat. How’s the view? Identify the blind spots. Are the controls easy to handle and reach?
- Does it drive quietly? How does it handle? How are the brakes?
Remember: when you get back to the showroom, you’re under NO agreement to buy the car. This was just a test. Be sure to get the salesperson’s card so that when you’re ready to buy you can return and bargain directly with that person.
One Last Thing!
Kelly Blue Book advises that the real bargains can be found late in the calendar year and model year. At these times, the dealers need to close out inventory for tax reasons and clear the lots for new models. Keep an eye out for overstocked sales or customer cash incentives — these are typically higher in the summer and winter months.