First Time Car Buyer's Guide
Buying your first can be scary, especially when you’re doing it alone. The decision you make can not only impact your finances today and in the future, but determines whether or not you actually get a good deal. Understanding the fundamentals will help you secure the best possible deal and avoid overspending when you don’t have to.
Know Your Budget
The biggest mistake first-time car buyers make? Walking into a dealership without understanding what they can actually afford. Your monthly payment needs to fit comfortably within your overall budget, including insurance, potential maintenance, gas (or electric), and registration fees.
Here’s the reality: If you’re looking at a $50,000 car with financing, the monthly payment can hit well over $1,000 per month, depending on your down payment, credit score, interest rate, loan terms, etc. But the same car as a lease? It might only run you $600 monthly. Again, that depends on various factors like down payment, money factor, incentives and more.
The smartest thing you can do before even looking at cars, is to determine how much you’re comfortable with spending every month. The last thing you want to do is budget only for the car payment without factoring in other associated costs, leaving you payment-poor.
The best way to find out what you can afford is to use an affordability calculator.
Credit Score
Regardless if you’re financing or leasing, your credit score determines if you qualify, and what rates you’ll get. The higher your credit, the better the interest rates and lease terms, and the more you’ll save over the life of your agreement.
If your credit is 650 or less, you can still get approved, just as a less-than-ideal rate. So, consider these first time car buyer tips:
- Pay down existing debts to improve your credit usage ratio
- Make all payments on time for at least 3-6 months before applying
- Consider getting pre-approved through a credit union, which often offers better rates than dealer financing
Even a small credit score improvement can help knock down interest rates. Another factor to consider is credit history. Lenders often look at both score and history to determine eligibility.
Do Your Own Research
Smart car shopping starts long before even stepping foot on the lot. Figure out exactly what you need from a car versus what you want:
Practical Considerations:
- Daily commute distance and driving conditions
- Passenger and cargo requirements
- Fuel efficiency priorities (gas, hybrid, or electric)
- Maintenance costs and reliability ratings
New vs. Used: The age old debate of new cars versus used cars. There’s no right answer here and, ultimately the decision comes down to more research and due diligence. New cars offer the latest tech and are fully covered under warranty, but often depreciate. Used cars on the other hand sometimes offer better value but require significant time, energy and resources to ensure you’re not buying someone else’s problem.
Need help figuring out what type of car to look for? Take our car finder quiz for some new ideas.
Leasing vs. Buying: A Numbers Game
This is another topic that has mixed opinions; it really just depends who you ask. Some people swear by only purchasing, and others like the convenience of a lease. Either way, this decision shapes your car-buying journey.
The choice depends on your priorities: outright ownership and long-term value versus lower payments and the latest cars.
When Financing/Buying Makes Sense:
- You drive more than 15,000 miles annually
- You want to build equity in an asset
- You prefer keeping vehicles long-term
- You want modification freedom
When Leasing Makes Sense:
- You want lower monthly payments
- You prefer driving newer vehicles with the latest technology
- You stay within mileage restrictions or don’t drive often
- You don’t want maintenance headaches after warranty expires
Understanding how leasing a car works helps you make an informed decision based on your specific situation rather than guessing what the right approach is.
Pre-Approval & Rate Shopping
If you do end up financing your car, getting pre-approved before shopping offers several advantages: establishing a realistic budget ceiling, streamlining the buying process, gives you negotiation power, and prevents you from making emotional decisions and overspending.
Credit unions typically offer competitive rates, sometimes as high as 2% lower than traditional banks and dealership financing. Shop around for the best rate and compare offers from multiple lenders.
The Auto Broker Advantage
Working with an expert auto broker can make your first time car buying experience so much easier, regardless of leasing or financing. We handle the time-consuming research, back-and-forth negotiations, and direct dealer contact on your behalf, securing better prices than what you’d get on your own.
Our clients regularly save $1,000-$3,000 per transaction because we understand how dealer pricing strategies work and have access to what they call ‘trunk money’, which is something the consumer (you) never hears about. The truth is, the dealerships have wiggle room, they just won’t tell you that. With us? It’s a different story.
Why use an auto broker? We make the process so simple, it eliminates the stress and uncertainty that tends to overwhelm first time buyers while ensuring you get the absolute best deal.
Steps to Buying a Car for the First Time
- Establish Your Budget: Include total monthly costs, not just the payment.
- Check and Improve Your Credit: Pull your credit report and address any issues before applying.
- Research Vehicles: Compare features, reliability, and costs across multiple models.
- Get Pre-Approved: Secure financing terms before shopping.
- Shop Smart: Compare prices across multiple dealers or ideally work with an auto broker.
- The Bigger Picture: Focus on the vehicle price, not monthly payments.
- Review All Documentation: Understand every fee and contract term before signing.
Special Considerations for First Time Car Buyers
Insurance Impact: Insurance costs vary dramatically between vehicles. Get quotes before finalizing your decision. This goes for both buying and leasing.
Total Cost of Ownership: Factor in fuel, maintenance, repairs, and depreciation when comparing options.
Future Flexibility: Consider how your needs might change over the next 3-5 years.
Current Market Opportunities
Don’t know where to start? Take advantage of manufacturer incentives and seasonal promotions. Our lease specials showcase current deals that can significantly reduce your monthly costs.
Market conditions constantly shift, affecting both financing rates and lease terms. Working with professionals like us who monitor these changes daily ensures you capitalize on the best available opportunities.
Your Next Steps
Buying your first car doesn’t have to be overwhelming. Armed with proper research, realistic budgeting, and professional guidance, you’ll secure a car that serves your needs without breaking the bank.
Whether you choose to lease or buy, the key lies in understanding your options and negotiating from a position of knowledge. Our comprehensive car leasing guide provides additional insights to help you make the best decision for your situation.
Remember: the right car at the right price exists. Take time to find it rather than settling for the first option that seems acceptable. Your future self will thank you for the patience and diligence you invest in this important decision.