Buying a car for the first time might be a rite of passage, but the process also might be anxiety-inducing. A car—like a home—is a big purchase. First-time car buyers might not know what to expect at the car dealership or even how they should begin their search for their ideal car.
The best cars for first-time buyers can be focused on price, safety or other features, too. Each buyer might have their own idea of what is the best car for their needs. When buying a car for the first time, though, here’s what to know about the dealership experience, how to find the best car for the budget and what to understand about financing, too.
How Much Should I Spend on My First Car?
Every buyer should have a budget or an idea of how much they can comfortably spend on their first vehicle. Nerdwallet advises that buyers should spend less than 10 percent of their take home pay on a car payment.
To better understand their car budget, buyers need to review their monthly income and expenses. While some expenses like rent or mortgage payments are fixed (this means they are the same each month), the cost of food and other expenses can vary. Consumers can
review data from a banking account to better understand spending habits related to food and other expenses. Total all these expenses for the month and include fixed expenses like rent, mortgage and any insurance premiums, too.
To understand income, add up monthly take-home pay. This is the amount received after health insurance deductions and taxes. Remember, a car payment should be—ideally—less than 10 percent of total take-home pay.
Some individuals, though, might have less than 10 percent of income to allocate towards a car payment. Only allocate an amount that is affordable. A car payment that is too high could lead to financial issues down the road.
When Buying Your First Car, Do the Research!
Once buyers understand how much they can allocate for a monthly car payment, they can better understand how much car they can afford. Now buyers need to research cars that are in their price ranges.
Buyers might be wondering how they can understand the total price of the vehicle when they only know how much they can allocate for a monthly payment. There are numerous calculators online that help buyers figure out how the price of a vehicle breaks down for a monthly payment. Buyers might have to research different cars they like and enter the price into the calculators to find out if it’s an affordable option.
However, interest rates affect the monthly payment. Depending on an individual’s credit worthiness, these rates can be lower or higher. Consumers are entitled to a free credit report each year; individuals who haven’t accessed their credit report for the year can request their free report.
Reviewing a credit report can help buyers learn their credit score and, therefore, better understand their interest rate options. For example, those with a good credit score might be able to secure more favorable interest rates.
Individuals who notice that their score is fair or low, though, might face higher rates. Those with poor scores also could have difficulty in securing financing.
Some dealerships or automotive sites let buyers get pre-qualified for financing. Getting pre-qualified can better help buyers understand how much financing they might qualify for and their interest rate options, too.
Getting pre-qualified for financing is considered a ‘soft inquiry’ on an individual’s credit. This means that getting pre-qualified won’t impact the credit score. However, buyers need to understand that getting pre-qualified for financing does not mean they are approved for financing.
In order to be approved for a loan or financing, an individual will have to complete a credit application and submit more extensive information (including a social security number).
First Time Car Buyer: Dealership Negotiating and Other Tips
Buyers can research their favorite car models to find the best options in their price range, and they also might go through the process of getting pre-qualified to better understand their financing options. If they plan to purchase their vehicle at a dealership, visiting the dealership will likely be the next step in the process.
The trip to the dealership and negotiating the price of the dealership might be a first-time buyer’s biggest worry. Negotiating can be an artform, and buyers should expect that while they want to get the lowest price possible, the dealership likely wants to make as much profit as possible.
A first-time buyer probably won’t have a trade-in to offer. A trade-in can be an easy negotiating chip for the buyer, especially when/if the price of used cars is at a premium.
Those without a trade-in might ask about any applicable deals or special promotions. These promotions could help lower the cost of the vehicle. When shopping for a used vehicle, the buyer also can ask for an inspection. If any issues are noted, these can be points of negotiation, too.
When buying a new car, buyers should research the prices of the same vehicle at other dealerships. Kelley Blue Book also lets buyers research the price of vehicles. Understanding the fair market value of a vehicle can help buyers better understand if the price is right.
The internet is the best tool for first-time buyers, as it’s an easy way to research different car prices in the area without leaving home. Buyers can do all their background research on their own turf and visit the dealership when they are ready to make a deal.
When a buyer is at the dealership, and they can’t come to an agreement on price, it’s ok to leave. Sometimes the best option is to walk away.
The Least Expensive Models for First-Time Car Buyers
For first-time car buyers who are on a tight budget but want to purchase a new car, there are many budget-friendly options available. The least expensive models might only offer the basic features on base trims, and some might lack the get-up-and-go of more expensive models.
However, purchasing a new car can be an amazing feeling, especially for a first-time buyer who has never driven a new model. Here are the least expensive new models on the market that might be a great choice for the budget-conscious first-time car buyer:
Priced at $13,600, the Spark is the least expensive model on the market. The model also is incredibly fuel efficient; it offers 30 MPG in the city and 38 MPG on the highway.
The Mirage is the most fuel-efficient vehicle on the market, and one of the most budget-friendly, too. With a base price of $14,645, the Mirage offers 39 miles per gallon combined.
With a base price of $14,980, the Versa is comparable in price to the Mirage. However, while the Mirage has a three-cylinder engine, the Versa offers a four-cylinder. The Versa offers 32 MPG in the city and 40 MPG on the highway.
Priced at $16,250, the Kia Rio is a little more expensive than the Mirage and Spark but still affordable for first-time buyers. The Rio also is very fuel efficient; it can get 33 MPG in the city and 41 MPG on the highway.
With a base price of $16,645, the Accent is a close competitor to the Rio. The model also boasts 41 MPG on the highway.
Other First-Time Car Buyer Research Tools
Sites like Kelley Blue Book can help buyers understand the value of a vehicle, but there are sites that are designed to help buyers explore all their options from home. In the past, buying a new car required buyers to actually visit the dealership to see a car.
Now sites like RelayCars use augmented reality and virtual reality to bring the car shopping experience into the home. Consumers can download the RelayCars app for free. Using the app, shoppers can explore thousands of models via virtual reality using Google Cardboard.
Those who don’t have access to Google Cardboard, though, also can explore different makes/models via 3D models. These digital models let consumers use their fingertips to rotate the car and view it from any angle. In addition, they also can explore the inside of new models, too, using the same type of immersive experience.
Car shoppers also can visit the RelayCars website via their smartphone or tablet. The site provides 3D model experiences and an augmented reality experience, too. Using the camera on their phone or tablet, the user can capture their environment and drop a 3D model of the vehicle into space.
RelayCars also provides a research hub for buyers, too. RelayCars includes price and other data for each model in its inventory. Buyers can use the site to compare different models and understand the base features for the model, too.
For first-time car buyers, RelayCars and other sites can provide all the tools needed to pare down their options. Once they find the best vehicle for their budget and driving style, they can stop by a local dealership to take a test drive and start the negotiation process.