Whether you’re a high school student who just passed their driver’s test, or a college student whose been saving up, your first car purchase can be one of the most exciting moments of your life. But before you grab the keys and drive off the lot, there are many things to consider—most importantly, how you can get the most for your hard-earned money.
Don’t just jump at the first sight of a car you love. Instead, use these tips to make sure you do your homework and find the best deal for your budget.
Know What You Can Afford
The first thing to consider is how much you can realistically afford. Have you saved any money? Will your parents or another family member be able to help? Take a look at your budget and what you have in savings. The worst thing you can do is look without this knowledge. Car salespeople have a reputation for a reason—you may get talked into something that you don’t even realize is out of your reasonable range.
When calculating your budget, don’t forget to factor in expenses like auto insurance, gas, and maintenance fees on the car. Use a tool like this Auto Loan Calculator from Bankrate so you’re confident about what kind of loan payment you can afford as well.
Shop for a Loan First
Once you know what you can afford, it’s time to start shopping around for a lender. In most cases, you’ll get the best rates from a bank or credit union than the dealership. This is especially the case if you’re already a member of that bank. By doing this first, you give yourself more bargaining power: If the dealership can’t match or beat the financing terms you have, you haven’t lost anything.
Still, there are two reasons to consider dealership financing. One of which is if they’re offering a significant promotion, explains Auto Trader, like 0 percent interest for the first six months.
“While that’s usually only true on new cars, it’s a rate that your bank won’t match. Dealers also shop your credit profile around to several banks. That means some offers may be lower than others—even lower than your bank’s.”
Triple Check Your Financing Options
Make sure that you research the financing options available and look at the fine print. “Compare both the monthly and overall costs of different financing options, suggest finance experts at Auto.Loan. They continue, “For example, a five-year loan for $8,000 will cost almost $8,625 if you pay 3 percent interest. A six-year term reduces the monthly payment by $22.20 but raises the total expense to $8,752.”
Use this thorough checklist from the Federal Trade Commission to compare these options. Writing them down on paper makes it easier to see the best option.
Shop Around for the Right Car
Working with several dealerships will allow you to truly find the best deal on the car that you want. In some cases, you may even be able to get dealerships to bid against each other to give you the better deal.
Don’t limit your search efforts to car dealerships, either. You may be able to find a good used in the classified ads or through online used car shopping websites. You can check the reliability and condition of the cars that you find by having a trusted mechanic inspect the car. Don’t forget to run a report to see if the car has been in an accident or had any other problems. If you buy from a private seller, and they won’t let you use your own mechanic for an inspection, move on to a different seller.
Weigh Used Versus New
There are clear pros and cons for buying both new and used. Consumer Reports says, “No question: The best way to save money is to buy used.”
Depending on your budget and your credit history, however, you may be better off with a new car. “New cars with the compelling incentives being offered are, in a lot of ways, a better value,” says Jack Nerad, executive editorial director of Kelley Blue Book, as reported by BankRate.
On the flip side, research shows that a new car loses almost half its value in the first five years. If you can find a used car that’s only a few years old, you’ll still get many of the current safety features for significantly lower prices, in most cases. To ensure that the car you’re considering buying is reliable, you can check the reliability reports available on ConsumerReports.org.
Another option to consider is buying Certified Pre-Owned (CPO). Dealerships that offer CPOs provide a complete reconditioning by their technicians and a strong warranty. This would allow you to purchase a lightly used car for significantly less.
Now You Can Find a Great Car—And Save Money
If you take your time and shop around for both financing and the most affordable prices, you’ll have a great first-time car buying experience. The best part: there are many ways to save money, so using even just one of these tactics will likely help you save a significant amount of cash.
About Jessica Thiefels: Jessica Thiefels has been writing for more than 10 years and is currently a lifestyle blogger. She’s written for Reader’s Digest, AARP, CollegeRaptor, Shape and more. Follow her on Twitter @Jlsander07 for more money saving tips and advice.