6 Buyer’s Guide for New Car Owners

Buying a new car is often a challenging experience, especially for new owners. But by following a few simple steps, customers can purchase their new automobile without feeling like it’s a chore. Choosing the type of car you want and doing your due diligence about lending, if required, could help you land the best auto loan rates in the market.

Let’s take a look at six key tips that every new car owner should keep in mind:

1. Budget

Knowing how much you’re willing to spend is an essential first step in buying an automobile. If a car is beyond your spending limit, it’s probably best to stay away from it. While dealers will often paint a rosy picture of financing options, it’s always better to do a bit of research to avoid paying for high-interest installments every month.

A good metric to consider is that your car’s monthly payments shouldn’t exceed 15% of your salary. It is also recommended to get loans for no more than 48 months, to avoid spending big on interest. Car ownership is supposed to be a pleasurable experience. So it’s essential to have a good sense of the money you will pay in the long term to avoid any financial setbacks.

2. Pick a Car

Perhaps the easiest step in the process is choosing a car that you like. We recommend making a budget first, allowing you to pick vehicles within your price range. Consider expanding your budget a little, but only if it’s not a significant increase. Make sure the car you choose has good gas mileage (or range if it’s an electric vehicle). Also check with your dealership about annual maintenance costs. Take a test drive of the car you want to buy to ensure there are no surprises.

3. Financing Options

New car owners have many options to choose from when it comes to financing options. A good rule to follow is to make a down payment of at least 20% of the car’s cost. This way, you are unlikely to default while protecting the purchase with the higher down payment.

You can come across many financing options online, though it is also wise to consult your nearest dealership for additional options. Remember to go through the fine print of the agreement before you sign up. In most cases, dealerships also provide auto loans to people with bad credit.

4. Insurance

Although you may be a safe driver, it’s illegal to drive your car without valid insurance. Car insurance laws are governed by the state, with 49 of the 50 U.S. states making it a requirement. Residents of New Hampshire don’t need car insurance for new vehicles, provided they can show evidence of financial stability. Comprehensive coverage is not compulsory in any U.S. state or on a federal level, which allows car owners to choose the policies best suited for their budget.

Car insurance policies include fine print that needs a thorough reading, similar to loan contracts. The insurance provider may have signed you up for benefits you don’t really require just to drive up the premiums. We also suggest that prospective car owners compare rates among the best auto insurance providers before making up their minds.

5. Finding the Right Dealer

While most car manufacturers provide a decent online website detailing all the features of the new car, visiting a dealership yourself is significantly better. While visiting dealerships was a bit of a challenge during the pandemic, with things beginning to ease up to some extent, you can walk into your nearby dealership for additional information on the car you want to buy. As we touched on above, dealers could also offer exciting discounts that are otherwise unavailable elsewhere.

6. Selling Your Old Car

This only applies to people who are upgrading to a new car, but it’s a novel route to follow nonetheless. If you’re selling an existing car to buy a new one, dealerships can usually give you a good price, which would then be converted into a discount on your new automobile. Of course, you can also choose to sell your car to a private owner if you’re getting a better price.

The Bottom Line

Buying a new car may seem like a daunting task, but it doesn’t have to be. When you’ve chosen a car that fits your budget and meets your requirements, you’ve already taken the first big step. With numerous auto loan providers to choose from, you can spread out your monthly premiums over a few years. But as we mentioned above, it’s always safer to get a loan for no longer than 48 months to avoid paying hefty sums on interest.

Insurance is also crucial, not to mention mandatory, in 49 U.S. states. Car owners have several options to choose from when it comes to insurance, ranging from expensive comprehensive coverage plans to basic auto insurance, with the latter boasting low monthly premiums.