Yahoo Finance How to Buy Your First New or Used Car
For a teenager, owning that first car brings fabulous freedom but also tremendous responsibility.
So be ready for significant expenses beyond the purchase price. You’ll also be on the hook for fuel, maintenance, repairs, insurance, and taxes.
Here we lay out some strategies for getting behind the wheel as painlessly as possible. And because a key element of driving includes sharing the road responsibly, see our guide to teen-driving safety.
What Can You Afford?
Establishing a reasonable budget is critical. The money you have available for a down payment and for making monthly installments on a loan will determine your car choices.
You’re probably also budgeting for college or other educational pursuits, so it’s important to work with your parents to set a realistic target.
In doing so, consider whether the car will see you through high school or college and beyond. That will determine how new and reliable it should be.
No question: The best way to save money is to buy used.
A new car loses almost half its value in the first five years, so go for one that’s a few years old yet still has contemporary safety features and many useful years ahead of it. And by buying used, you can usually afford a nicer car than you would if new.
As a teen, financing will be a challenge. Lenders usually look for adults with a good credit score, a steady employment history, and financial assets, such as a house or a sizable bank account.
In most cases, that will mean a parent will have to be a co-signer or even take out the loan in their name. The good news is that many finance companies have specific programs for college students and graduates that ease some credit requirements and even offer special rebates.
A loan is a business agreement from a lender—like a bank or finance company—charging interest for you to borrow money. The lower the interest rate and shorter the loan period, the less additional money you have to pay in finance charges.
The best solution might be to borrow from a family member, repaying them an interest rate similar to what they would get from a savings account. That saves paperwork, keeps the money in the family, and possibly allows for payment flexibility.
Do Your Homework
With a budget in mind, you can start on the fun part: creating a short list of vehicles. Focus on practical choices, cars that minimize ownership costs and will suit your needs for the next few years.
Resist the temptation to get a sporty, luxury, or large vehicle. It will probably cause you to tap your college fund to cover insurance, maintenance, and fuel costs. Instead, look at small sedans and hatchbacks from mainstream brands or, even better, midsized sedans.
A high-horsepower car or one with the latest high-tech features isn’t practical. Insurance companies penalize young drivers with sporty cars; big engines cost more to fuel and maintain; and extra features tend to carry reliability risks. Car insurance will already be a major expense.
When you get a loan or lease agreement, most banks require full-coverage insurance. So get a quote for the vehicle you're interested in, so you can make a truly informed purchase decision.
To reduce the risk of buying a lemon, identify models with a good reliability record. Check ConsumerReports.org/reliability for survey-based insights that can point you to cars that have been shown to hold up well over time.
Inspect and Test Drive
Go online for reviews of the cars you’re considering. Balance the perspectives with your preferences, and use the feedback to highlight aspects that call for closer attention.
For instance, complaints about the seat comfort or ride quality can be evaluated on a test drive. Your opinions might be different.
New cars are presumed to be consistent performers. (For example, each new Honda Civic is expected to drive like any other.) A casual inspection can confirm whether a car is truly in “new” condition.
But each used car has led a different life. Some might have been pampered, others abused. The best used cars tend to be owned by a trusted friend or family member who can share details of the car's history.
When shopping for a used vehicle, ask a car-savvy adult to join you. Carefully look the car over inside and out, top to bottom. New or used, always inspect it during daylight hours when you can spot paint flaws that might indicate repairs or other troubles. Essentially, you’re looking to ensure that the car is in the condition claimed by the seller.
For used cars, it's important to have an inspection by a certified professional mechanic. They usually charge for the service, but it can be money well spent.
Negotiate Like a Pro
If the car looks good, then it’s time to talk numbers. When negotiating a purchase, it’s essential to have an experienced adult to assist.
Professional car salespeople have been trained to push sales and maximize profits. That's what they do day in and day out. Most shoppers are outgunned during this phase of car buying, and a first-time buyer doesn’t stand a chance going solo.
If buying from a private seller, negotiation is usually straightforward. Research online what the current wholesale price (aka trade-in price) is for the car based on its condition, mileage, and location. That's your target price.
A used-car lot or dealership will focus on the retail price, also easily found online. Chances are the car was acquired through a trade-in or at an auction for near the wholesale price and fixed it up, and now the dealer needs to make a profit.
Get as close to the wholesale price as possible, though you’ll probably end up between the two figures.
If you are financing, prearrange the loan so that you know what the interest rate is. If the dealership can beat it, great. If not, then you’re still covered. From that, you can use an online calculator to figure out what your payments will be based on the expected purchase price and down payment.
The salesperson will probably focus on monthly payments, which enables him or her to sneak in added profit. Because you did your homework, you can focus on the total amount rather than just the monthly payments.
Negotiate one element of the deal at a time. Establish the purchase price, and then move on to discussing financing, if interested. Don’t be talked into unnecessary extras, such as rustproofing, a fabric protector, or an extended warranty.
If the seller won’t meet what you consider a fair price, walk away. Every year, more than 15 million new cars are sold—and every one of them is considered used once it leaves the dealership. Rest assured, there are plenty of other cars out there to choose from.
Must-Have Safety Features
Whether buying new or used, these are the features you want:
Antilock brake system (ABS): Readily available, antilock brakes prevent the wheels from stopping completely during hard braking. Because the wheels don't lock up, even during emergency braking on slippery surfaces, the driver retains steering control.
Electronic stability control (ESC): This feature prevents a car from rotating when going through a turn a bit too fast for the conditions, like bad weather. All new cars and light-duty trucks now have ESC. On older cars, ESC might have been optional. Make sure the used car you’re buying has it.
Head-protecting side airbags: Side and side-curtain airbags have been shown to provide real protection in a side impact, such as when a car is T-boned by another car crossing an intersection.
Forward-collision warning: Available on many new cars, FCW uses cameras, radar, or laser (or some combination of them) to scan for cars ahead and alert the driver if he or she is approaching a vehicle in a lane too fast and a crash is imminent. Most systems alert the driver with some sort of visual and or audible signal, allowing time for the driver to react. Better systems include automatic emergency braking, enabling the car to hit the brakes if the driver fails to do so.
Backup camera: Common on new and almost new cars, a backup camera is activated when the vehicle is placed in Reverse. The rearview is displayed in a center console screen, aiding parking and helping avoid accidents with pedestrians or other cars.
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Best used cars for $25,000 and less
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