Buying your first vehicle is a significant step in your life. Having reliable transportation is necessary. Additionally, when you buy a car, you start building your credit that will help you in the future. However, it can be a little overwhelming to step into the dealership. Before you go into the showroom and become overwhelmed by the shiny vehicles and smooth-talking dealer, keep the following things in mind—you will be better prepared and less likely to make a mistake.
Used is often MUCH Cheaper than New
While new car deals may sound tempting, the overall value of a used car is often much better than a new one. Make certain you look at your bottom line price–not just monthly payments. The standard caution against buying new is your car will dramatically depreciate in value the second you drive it off the lot. While in some cases, buying new may make sense, if you are on a budget you will often do better looking at vehicles that are two or three years old.
The Invoice Price is Different from the MSRP
If you do decide to buy new, the MSRP (Manufacturers Suggested Retail Price) includes a cut for the salesman and other incentives. Look online to find the invoice price (price the dealership pays for the vehicle). This can help you better understand what price would give you a good deal and still offer a profit for the dealership.
The Dealer May Try to Upsell You
In most cases car dealers, both new and used, work on commission. This means that while he or she may seem very friendly, the dealer is trying to find ways to get you to spend more money than you may have planned to spend. This may mean trying to talk you into a more expensive vehicle or to convince you that you need upgrades or service packages. Decide what your limits are before you visit the dealership and if it is not within your budget, say no.
Your Credit History Determines Your Lending Options
If you have an established credit with a good history of making payments, you will be able to qualify for a higher limit and lower interest rates. Consider reviewing your credit report beforehand, so you know what to expect.
Ultimately, You Have the Power
While it does not feel like it, the buyer does have the power. If you are not comfortable with the deal, walk away from it. You can visit another dealership or you could return another day and work with a different salesman.
Buying your first car is a great first step towards financial independence. If you prepare for the process, it does not have to be overwhelming. Plus, when you finally sign the papers, you get to drive away in your new or used vehicle which is always a great feeling! Do not let the stress keep you from this important step in your life.
What was your first car-buying experience like? What would you have done differently? What would you do the same next time?