7 Things I Wish I Knew Before Buying My First Car
Congratulations!!
You’re buying your first car!
It’s exciting, empowering and completely terrifying.
You’re about to drop thousands of dollars on (what may be) the biggest purchase of your life so of COURSE it’s nerve-wracking and intimidating to have pushy cars salesmen pressuring you to buy.
When I bought my first car - a brand new Nissan Sentra - I really had no idea what I was doing.
Here are 8 lessons I WISH I had learned before dropping $30k on a brand-new car.
Lesson #1: Get pre-approved
Getting pre-approved for a car loan means shopping around for different lenders who would be willing to give you a loan - and trying to find the one with the best terms for you.
This is helpful for a couple of reasons:
It helps you budget better for your new car, because you know how much a lender is willing to give you.
It helps you shop around for the best interest rates - the lower the interest rate, the less you’ll pay over the course of the loan.
Dealers often have particular lenders that they work with, and they don’t necessarily have the best interest rates for you.
A 1% difference in interest rates may not seem like a lot, but it can add up to hundreds or thousands over the full course of your loan.
Taking the time to shop around for the best terms makes sure that you are getting the best deal.
Lesson #2: Call your lender before signing (if you didn’t get pre-approved)
If you don’t get pre-approved (which you should - see lesson #1!) and you do your financing through the dealer - call the lender to confirm the interest rate and terms of the loan before signing the paperwork.
There is a sneeeeeaky fee that lenders can tack on called a “finance reserve”.
Basically, let’s say you get a loan from the bank at a 4% interest. The dealer can then add on an extra 1 or 2% on top of that as a “fee” for arranging the financing.
And it is completely legal.
I know there is so much paperwork when you’re buying a new car, but it is SO important that you take the time to read it and ask questions if you don’t understand something.
You’re putting tens of thousands of dollars into this purchase. It deserves your scrutiny to make sure you’re getting the deal you think you are.
Lesson #3: Know the hidden costs
You know when you buy a new car that you’ll have to make a monthly payment, but what about:
Gas
Car insurance
Property taxes
Oil changes
Unexpected maintenance
State and emissions inspections
The real monthly cost is everything involved in keeping your car on the road.
In order to create a realistic budget, add up your estimated annual costs for insurance, tax, maintenance, and any other expenses you predict.
Then divide that number by 12. THAT is the true monthly cost of owning a vehicle.
If that number looks really big and scary to you, then you should probably start shopping for a cheaper vehicle.
Lesson #4: Don’t panic about negotiating
As women, we are socially conditioned to be non-confrontational and car buying is one of those things that can feel so pushy and almost borderline aggressive sometimes.
So it’s no wonder we’re nervous about negotiating!
The best piece of advice I’ve ever learned about negotiating is that: negotiating is a collaboration.
You want a car. The salesman wants his commission check.
If they’re not willing to work with you - it’s not a collaboration. So take your business elsewhere.
And don’t fall for the “there’s nothing we can do” spiel. It is a lie.
One thing I did RIGHT when buying my car was not accepting the first price they showed me.
I knew it was out of my price range, and I was literally walking out the door but they got me back by dropping the price by $2,500.
Negotiating can be nerve-wracking but don’t go into this like a fight to the death. Go into it with a confident “help me help you” attitude because YOU hold all the cards.
Lesson #5: Plan to go over budget
You can go into car buying with the best intentions to stick to your budget, and then… oops.
If this has happened to you - don’t feel bad! It’s happened to me too.
Here’s what to do:
Run some numbers on what will fit comfortably into your budget. If you find out it’s a clunker at best - don’t panic!
Most people at this point would say - screw it! - and go buy the car they really want, regardless of budget.
This is because, despite its reputation for being all about math & spreadsheets, money is really 95% about psychology.
Logically we should buy that old car because it’s what fits our budget.
But realistically we don’t want to be seen in that thing!
If your numbers say you can only afford a 25 year old sedan with no side airbags, but you have four young children… the mommy genes kick in and say “I cannot drive my babies around in that thing!!” (and you shouldn’t!).
But instead of completely blowing your budget, try giving yourself a couple of options:
On the low end, what’s the car you could absolutely, comfortably afford with no serious strain to your budget?
On the high end, what’s the car you absolutely cannot afford (without selling a kidney)?
You’re shopping somewhere in the middle.
That’s the sweet-spot where you’re not completely throwing your budget out the window, but you’re also being realistic about what you actually want and what will fit your life best.
If you give yourself some wiggle-room to go (a little) over budget, it will help prevent you from impulsively going WAY over budget and getting yourself a car that you can’t actually afford.
Lesson #6: Get car insurance ahead of time
Even if you don’t have the exact car picked out yet, contact your insurance and let them know that you’re shopping for a new car.
They can give you an estimate based on the make and model that you’re shopping for.
It’s required in most states to have car insurance prior to driving your car off the lot (and I almost didn’t get to drive my new car home!).
Lesson #7: don’t buy the extra dealer insurance
For most people, buying their first car is the biggest purchase they’ve ever made.
It’s easy to get caught up in the moment and panic that something will happen to it the second you sign the paperwork.
And… that’s how they catch you.
In most cases, the insurance provided through the dealership is not helpful or useful and they’re only trying to boost the total price you pay.
And remember, even $500 extra added to the total price is still being charged interest.
So that insurance is going to cost more than the price they quote you.
I know it’s nerve-wracking worrying that something will happen to your new car the second you drive it off the lot - but nearly every type of insurance you would need is offered by your standard car insurance.
Say no to all those add-ons they push at your when signing the papers.
You’ll save yourself a lot of money.
Buying your first car is a big deal - and it can be exciting, but also completely overwhelming.
These lessons will help you walk into the dealership feeling confident and ready to make the best decision for you.
Action items:
Start looking around for lenders to pre-approve you for a loan.
Run some numbers on your car - how much do you think you’ll pay in insurance, maintenance and taxes?
Plan to fall in love. If you fall in love with a car that’s out of your budget - what will you do? Think about how you will handle it beforehand so you don’t fall into an impulse-spending trap in the moment.
Katherine, founder of Imperfect Budget
Imperfect Budget is an educational platform built to help women align financial goals and free themselves from limiting money mindsets.
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