Essential Tips for Buying Your First Car

Feb 18, 2016

buyingfirstcarBuying a first car is a major milestone for anyone—representing the promise of freedom and the gateway to fun. On the other hand, because a car is likely a far bigger purchase than anything you have ever bought before, buying your first vehicle can also be a daunting experience if you’re not prepared! To help you gain confidence when car shopping, save money, and avoid common pitfalls, take a look at our pointers below:

Determine your budget before you start shopping: If you don’t know what you can realistically spend on a car before you venture out to a dealership, you make yourself an easy mark for someone who has no problem selling you a car with monthly payments you can’t afford. Even if you’re buying your first car entirely in cash, you’ll need to factor in costs such as insurance, fuel, maintenance, and possibly parking in order to know whether a car is truly affordable for you. Keep in mind that insurance rates for young people tend to be higher than other adults, and that certain types of vehicles, such as sports cars with big engines, often cost more to insure.

Get an impartial perspective: Once you’ve identified the specific make and model of a handful of cars that you like and can affordably own, get online to find out what the experts have to say about them. Don’t rely on the dealer or seller to provide accurate, unbiased data about how a certain car compares to similar models in the same price range, or to be especially forthcoming with safety reports. Instead, visit a trusted source such as Consumer Reports for car reviews and ratings. Also, while in many ways we are all guided by emotion when making a major purchase such as a vehicle, the act of actually reading objective information on a car can often be helpful in steering you away from a choice that is highly impractical for you, and that you may later regret.

Know what a car is actually worth before you make an offer: While a dealership is required by law to display the manufacturer’s suggested retail price (MSRP or sticker price) on any new car that is being sold, they can, and often do, sell the car for significantly less. Unless a car is in very high demand, you can usually negotiate the price down if the dealer can still make a profit by selling the vehicle at an acceptable level above what is referred to as the dealer-invoice price (what they paid for the car minus incentives and holdbacks).

Before you start negotiating on a car, find out what its true market value is. For used vehicles, you can get reliable pricing information at Kelley Blue Book.  If you’re buying new, check out TrueCar to find out what others in your area have paid for a specific vehicle. Looking for more information on how to negotiate the best price on a car? Visit Consumer Reports at

Start thinking about financing early: For most people, buying a car usually involves financing. But if you’re a young person with little or no credit history, finding a lender that will approve you for an auto loan generally requires some additional planning, so you’ll want to explore your options before you’re ready to make an offer on a vehicle. Having a parent or another close family member co-sign a loan for you is one way to handle financing, and it can be an excellent way to establish credit. If you don’t have anyone who is willing and/or able to co-sign a loan for you, you can begin building your credit yourself with a secured credit card from your credit union or bank or by opening up an account at a retailer or gas station.

Even if you have already established credit in your name, waiting until you’ve at a dealership to start thinking about financing options can be overwhelming. Additionally, you may be able to find better terms by working directly with a lender such as your credit union rather going through the dealership for a loan.

Don’t skip the test drive: Regardless of all the research you can do online right from your living room couch, you won’t really know whether a car is a good fit for you until you take it for a drive.  It may seem like obvious advice, but many young people get their minds set on a particular car before even getting into the driver’s seat! Plan to invest a decent amount of time behind the wheel of a car you’re interested in to see how it actually feels and handles, on both on the freeway and on local streets, before you get too far along in your decision-making process!

Make sure you’re prepared for a worst-case scenario: If you’re financing a new car, one fact you should be aware of is that a new car loses an average of 30 percent of its value during the first year after you purchase it. This means that if you were to get into an accident during this time, and suffer the total loss of your car, or if it were to be stolen, a typical insurance policy would not pay out enough from your claim to cover what you owe the lender. In most cases, you would only receive the “current cash value” for your car.  A solution to this problem is to consider purchasing car gap insurance or GAP protection, which covers the difference between your vehicle loan and the current cash value of your car.

Are you planning to finance your first car and want the peace of mind that comes from knowing that you won’t be out several thousands of dollars if your car becomes totaled or is stolen? SF Credit Union’s Guaranteed Auto Protection (GAP) Plus Coverage can be an excellent option for you as a first-time car buyer. In the case of a Total Loss or Unrecovered Theft, GAP Plus Coverage pays any remaining balance due on your loan over the payment from your insurance company. Protection is available for vehicles valued up to $100,000. For details, click here.

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