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Tips for First Time Car Buyers

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Maybe you’ve gotten by without owning a car until now based on where you live. Or maybe you were driving a parent or sibling’s “vintage” hand-me-down model — which finally quit on you somewhere on the commute between home and work. Or if you want to go for a modern type of car, you can have Honda Shuttle 1.5G LED, which is an immensely popular 5 seater station wagon and for all the right reasons. It is reliable, sensible, powerful enough and packed with desirable features.

Just remember — everyone who has ever successfully navigated the car-buying process was once in your shoes. Here are some helpful tips for first-time car buyers to help you prepare.

First Things First: Work Out Your Budget

While there’s no hard-and-fast rule about exactly how much you can afford to spend on car payments — it depends on your income and other debt obligations — experts generally recommend keeping your monthly loan payment at or below 10 percent of your net income.

In addition to your loan, you’ll also need to budget for maintenance, fuel and insurance premiums.

Knowing exactly how much you can and cannot afford to spend will help you know your limits at the dealership — an environment in which it can be very tempting for first-time car buyers to throw their inhibitions out the window if they fall in love with a shiny model on the lot.

Let your predetermined budget dictate your choice of vehicle, not the other way around.

Avoid Extending the Length of Your Loan

It’s tempting to consider car affordability in terms of monthly payments — “Oh, I can handle $275 per month, so this car must be a good fit for my budget.” However, this approach fails to consider the length of the loan and, therefore, how much interest you’ll end up paying over time.

Longer loans can bring down monthly payments, but ultimately cost you more in interest — often hundreds or thousands of dollars more.

Auto loans are trending longer. According to Consumer Reports, the average car loan clocks in just under six years, and more than one-fourth of loans on new vehicles now exceed six years. Experts, however, recommend keeping loans at or below four years if possible.

Base your monthly payments on a loan of a reasonable length — ideally 36 to 60 months — rather than stretching it out because monthly payments get cheaper that way.

Explore All Your Financing Options

It’s better to know all your options up front and narrow them down than to walk into the dealership assuming a loan from their financing department is the only way to go.

There are two major decisions to be made: Should you lease or buy?

Both approaches have pros and cons, but it ultimately depends on:

  • How long you want to use the vehicle: Leases tend to have shorter terms than loans.
  • How many miles per year you will drive: Leases tend to limit mileage; loans do not.
  • How much of a down payment you can afford: Anticipate putting down 20 percent or so for loans on a new vehicle.
  • Whether convenience or equity is more important: You will be able to trade in your vehicle scot-free at the end of the lease but buying leaves you in full ownership of the vehicle after your loan is paid off.

And, if you decide to buy, should you seek financing from an outside lender or go with the dealership’s offer? Either way, getting preapproved for financing before even visiting the car lot will give you options and more power to negotiate, as you’ll walk in with an offer already in hand based on your credit score.

Brushing up on tips meant for first-time car buyers will help you purchase your car like a pro.3

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