10 Things Every First-time Car Buyer Should Know

Buying a car for the first time is exciting, but it can also be stressful. This is a huge purchase, and you don't want to make any mistakes. Avoid making mistakes by following these tips.

1. Have a Down Payment Ready

If you're about to buy your first vehicle, you might want to finance the entire purchase. However, it's wise to put 20 percent down on a new vehicle and 10 percent down on a used one. New cars, trucks, and SUVs generally depreciate within the first year, so you could end up upside down in your loan if you don't put 20 percent down. Also, when you put 20 percent down, your loan terms will be more favorable.

2. Look at the Five-year Cost to Own

Think beyond the purchase price when determining how much a new vehicle will cost. Evaluate the five-year cost to own to see how much you'll spend. Calculate the five-year cost to own by adding the average cost of maintenance, repairs, insurance, fuel, state fees, financing, and depreciation. If the cost to own is too high, keep looking around. Shopping for car insurance is especially important as well, as insurance price can vary by state and by the amount of coverage.

3. Don't Be Afraid of Buying Used

You might want your first new vehicle to be shiny and new, but don't discount buying used. As long as the vehicle is only a few years old, it likely has the same features as the new model at a fraction of the price.

4. Explore Your Financing Options

The salesperson will want you to finance the vehicle through the dealership, but you could end up paying much more in interest if you go that route. Dealerships typically go through a credit union or bank to secure financing for clienShopts. Then the dealership often pads the interest rate and splits the profit with the financial institution. Avoid paying extra by going to a bank or credit union yourself.

5. Choose a Short Loan Term

The most common auto loan term is 72 months, but it's a good idea to only finance for 60 months or less. If you choose a longer loan term, you'll pay more interest and could end up owing more than your vehicle’s worth before you pay it off. If you cannot afford payments on a 60-month loan, look for vehicles that cost less.

6. Get a Pre-purchase Inspection Before Buying a Used Vehicle

Never buy a used vehicle without getting a pre-purchase inspection from a mechanic you trust. This will help you avoid buying a lemon. You will have to pay for the inspection, but it's worth the cost.

7. Research Before Going to the Dealership

Some salespeople use high-pressure tactics. It's easy to cave to pressure when you don't know what you want. Do your research before you visit dealerships. Then you'll know as much as the salesperson does so that you won't be pressured easily.

8. Get the Most Out of the Test Drive

Take your vehicle on a lengthy test drive, so you can test the different features. Roll the windows up and down, try the radio, test the navigation, and more.

9. Negotiate the Price

Many dealers are willing to negotiate the price, especially on used vehicles. If you notice any imperfections, you can use that for leverage during the negotiation.

10. Be Wary of Extended Warranties

The salesperson might try to sell you an extended warranty. It's easy to lose money on these, though. Read the policy carefully to see what's included and excluded. If it isn't a good deal, don't purchase it.

Get Ready to Claim Your Freedom on the Road

Car ownership equals freedom. Once you have a vehicle, nothing can hold you back. Keep these tips in mind, and your car-buying experience will be a breeze.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes