When you start thinking about buying a car, remember that delaying the purchase as long as possible is best. Insurance rates are cheaper for drivers in their 20s than for drivers in their teens, but having a car at all is a huge financial burden. Most people can’t afford to pay for a car outright, so you’ll have to deal with loans and financing on top of your everyday maintenance costs. And trust me, having just bought my first new car, those costs add up. Before you head to a dealership to buy a car, do your due diligence on the following 10 topics:
1. Determine your transportation needs.
While having a car is great, think about your needs, not your wants. If you’re in high school, you may not need a car at all. The same goes when you’re in college; if you live on a campus that is completely accessible by foot, there’s no need for you to bring a car. Even on a large campus you may not need a car; colleges often work out deals and discounts for students with local public transit services, or may even have their own bus system. If you can take the free bus, why would you want to pay for your own gas and maintenance? Of course, if you work five days a week half an hour away from campus or if you plan to drive home to visit your parents every weekend, a car may be necessary. Think about your commitments before you decide to buy.
2. Consider your finances.
How are you going to pay for a car? Do you have money that you’ve been saving up or are you going to rely exclusively on a loan? Will you make a down payment? The more money you can pay upfront (your down payment), the smaller the loan you’ll have to take out and the more money you’ll save on interest. Keep in mind, too, that loans are offered in different time frames; the shorter the time frame, the higher your monthly payment, but the less interest you’ll have to pay than if you decide to pay off your loan within a longer timeframe.
Check your credit score before you start the car-buying process. If your score is good, you’ll have some leverage to negotiate with. A higher credit score should qualify you for better (lower) interest rates when it comes to financing. Look up your score and search for the average car loan interest rate so you know which percentage rates are in the ballpark, and which are way out of it. Unfortunately, if your credit score is low, you won’t be able to qualify for the best interest rates.
Don’t just consider the cost of the car and financing, though. Remember, you’ll also be paying for insurance, gas, regular maintenance, and parking. We also recommend becoming a member of an automobile club like AAA. They can help you out if you get a flat tire, need a new battery, or get stuck on a road trip.
3. Shop around for insurers.
The longer you wait to get your own car, the more money you’re going to save on car insurance. An 18-year-old can expect to pay an average annual premium of $4,055. If you wait to get car insurance until you’re 20 years old, you can expect to pay between $2,599 (if you’re female) and $3,097 (if you’re male) each year. Teens, and particularly, teen males, are among the most expensive people to insure. Different insurers, though, calculate risk in different ways. If you’re set on getting a car, ask several different insurers for quotes and go with the cheapest one. Note that it may be cheapest to get on the same policy as your parents.
If you want to get the cheapest insurance rates, there are several discounts you may qualify for: the good student discount (show your insurer your most recent grades), the resident student discount (if you leave your car at home while you’re away at college), or the safe driver discount (show your insurer that you’ve taken a defensive driving course). You may get additional discounts for having a clean driving record or driving fewer miles than average each year.
4. Decide if you’re going to buy new or used.
Remember, every new car becomes a used car as soon as it’s driven off the lot. If you aren’t worried about having a top-of-the-line vehicle, look at used options. They’re always going to be cheaper than buying the same car new, and often they’re in great shape. That being said, new cars probably won’t need any significant fixes for the first couple years of ownership, but depending on the state of a used car, it may need more upkeep. Furthermore, some used cars (namely Toyotas) retain more value than others. Use Kelley Blue Book to look up pricing for the makes and models that you’re interested in.
5. Do your research.
There are hundreds of different cars out there, thousands if you throw in the fact that models vary from year to year. Before you head to a dealership, do your research online. If you subscribe to Consumer Reports, check their new and used car rankings (they rate reliability and consumer satisfaction). This year, the Toyota Camry and the Subaru Forester top the list of best new models, and the Toyota Camry, Toyota RAV4, and Nissan Juke top the list for most reliable used cars of the same size. Consumer Reports isn’t your only resource; check out U.S. News & World Report, CarMax, and Kelley Blue Book, too.
6. Ask friends and family for dealership recommendations.
Chances are, you know someone who has bought a car. Ask where they purchased it and if they would recommend the dealership. Then, ask if they’ll come with you when you go to buy your car. It’s in the job description of a salesperson to be persuasive, if not downright pushy, so bringing someone with you who has been through the purchasing process is a first line of defense. When it comes time for you and your parent (or friend) to negotiate, be firm. Don’t cave on pricing or financing; if you can’t come to a satisfying deal, leave.
7. Test drive all your options.
Don’t plan on buying a vehicle the first time you visit a dealership. Instead, once you’ve done some research and picked out the cars you’re most interested in, visit a dealership simply to test drive all your options. Get the feel for how each car handles and pay attention to the features in each. Do you feel safe? Do you like having a backup camera? Do you want to spring for heated seats? Spend a day or two thinking about your options after doing the test drives, and then go back to the dealership ready to buy.
8. Do a background check if you’re planning to buy a used car.
Don’t believe everything that a salesperson tells you about a used car. Just because the price is right and it’s a top-rated model on paper doesn’t mean that it’s in great condition in reality. So much is repairable that a car may not look like it’s been in three accidents on the outside, but the interior could show signs of damage that could shorten the life of the vehicle. Before buying a used car, ask for a history report from Carfax and consider getting an inspection from a certified mechanic. You’ll have to pay to have the car inspected, but the upfront cost is worth it if it saves you from having to spend thousands of dollars on repairs later on.
9. Check out your financing options before buying.
You can get financing at the dealership, and it’s quite common, but you’re not always going to get the best rate if you simply go with what’s offered. Before you buy, ask for car loan quotes from your bank or another lender in your area. Knowing what interest rate you’ll get from your bank is going to give you one more way to negotiate when it’s time to buy. A dealer may offer you better financing when you confront them with your other option(s), but if they don’t, you’re well within your rights to get your car loan from someone else.
10. Wait to buy.
You don’t have to wait years, or even months, to get a good price on a car. Salespeople have quotas to meet each month or quarter (every three months), so waiting to buy until the end of a sales cycle is only an advantage for you. When salespeople get desperate, they’ll want to move cars off the lot at any price, if only to make the sale and hit their number. You’ll also find that weekdays are less busy than weekends, so consider buying your car on a weekday morning. Any sale is better than no sale, and when a dealership isn’t busy, you’ll get more focused attention from your salesperson.