Guide for First-Time Car Buyer
Buying your first car can be a great investment that makes getting to work, visiting friends and seeing the world easier. It’s also a major financial decision, particularly with prices today ranging from almost $27,000 for a compact car to more than $74,000 for a luxury vehicle.
Your first step in making such an important acquisition is figuring out what type of vehicle works best for you, how much car you can afford and how you’ll pay for it. Let these tips on car buying guide you to getting what you really want out of your first car purchase.
How much money should you have before buying your first car, and is it important?
The car you buy will depend on your budget. Before you get caught up in the buying frenzy, it’s important to know how much money you make, what your bills are and what’s left over. In addition to transportation costs, you must account for housing, food, utilities, renters or homeowners insurance, health insurance, savings and fun. If you recently graduated from college, you may need to include monthly student loan payments, as well.
And understand that the sticker price is just the beginning. You’ll also pay sales tax and registration, title and dealer fees. Focus on the total price to avoid going over your budget.
Then there are the ongoing costs of fuel, insurance, maintenance and repairs, parking and a lot more that add up over time.
Financial experts generally recommend that you spend 10% to 15% of your monthly net income on your car payment. Combined with insurance, maintenance and gas, your total monthly car expenses should be no more than 20% of your monthly earnings.
Once you estimate your cost of living, use a car affordability calculator to find a loan payment that fits your budget and check the prices of cars you can afford. Then start putting money aside each payday. The more you can pay up front in cash for that first car, the smaller your monthly payments will be.