Buying your first car is a big deal. It means no more begging for rides or planning your day around someone else’s schedule. But figuring out what to buy, how much to spend, and how to ultimately make it yours can feel overwhelming. The good news? It doesn’t have to be stressful. This guide breaks down the car-buying process into simple steps, so you can focus on finding a ride that fits both your lifestyle and your budget.
Assess Your Needs
Before you shop, take a step back and think about what you really need from a car.
Think about your lifestyle:
- Commute: Fuel-efficient or just reliable for short trips?
- Space: Will you be hauling friends, pets, groceries, or sports equipment regularly?
- Weather: Do icy winters or rainy seasons call for all-wheel drive?
- Features: Is Bluetooth a must-have? Do you need a backup camera? Or are you fine with just the basics as long as it gets you from A to B?
When you know your needs versus your wants, it’s much easier to skip the distractions and find a car that makes sense for you.
Know Your Budget
Buying a car isn’t just about the sticker price; it’s about what you can afford month after month. Before you start test-driving vehicles, establish your budget. A good rule of thumb is to keep your car payment (if you’re financing) under 10%–15% of your monthly take-home pay. If you’re paying with cash, remember to keep a buffer in your savings for any unexpected costs.
Warning! The budget doesn’t stop at the price tag. You also have to account for insurance (which is often higher for first-time buyers), gas or charging costs, maintenance and repairs, and registration and taxes. Once you’ve factored everything in, set a price range you feel comfortable with while identifying your absolute maximum. That way, you’ll focus on cars that realistically meet your needs.
Improve Your Credit Score
Check your credit before shopping, as higher scores mean better rates and more leverage. Even small steps like paying on time, lowering balances, and fixing errors can boost your score. With Credit Score in the Belco Money Manager App, you have access to your credit score, full credit report, and credit monitoring.
Improving your credit takes time, so the earlier you start, the better. Even a few months of careful credit habits can help you get a better deal on your first car.
Consider Buying Used
One of the biggest decisions when buying your first car is whether to go new or used.
New cars are less likely to have major problems, can come with lower interest rates because lenders see them as lower risk, and provide more financing options.
Used cars cost less up front (leaving more room in your budget), lose value more slowly once you drive them off the lot, and usually have lower insurance costs.
At the end of the day, do you want peace of mind and the latest bells and whistles, or a lower price and less depreciation?
Save for a Down Payment
Putting money down upfront can make a big difference. Aim for a 20% down payment on new vehicles, while a minimum 10% down payment is appropriate for used cars. The more you can save, the better. A larger down payment helps lower your interest rates, reduces your monthly payments, and allows you to pay off your car faster. It’s a smart way to start your car ownership on the right foot. Use this calculator to see how different down payments or loan terms can impact your monthly payment.
Do Your Research
Before you settle on a car, take some time to check its value. Comparing prices to resources like the Kelley Blue Book helps you see when a seller’s asking price is too high and gives you an edge when negotiating. Knowing the market value also makes it easier to spot a great deal and feel confident that you are paying a fair price.
Explore Financing Options
If you’re not paying cash, you’ll need to figure out how to finance your vehicle. Compare auto loans from banks, credit unions, and online lenders to find the best rate. Look beyond the monthly payment. Check interest rates, loan terms, and fees, since all these variables can ultimately cost you more. Having multiple offers also gives you leverage when negotiating. The more options you have, the more likely you’ll find a deal that checks every box. Read more about factors to consider when applying for an auto loan here.
Find Your Dream Car
Once you know what you want and what fits your budget, it’s time to decide where to look. Options include:
- Dealerships (new or certified pre-owned): They offer warranties, inspections, and financing, though prices can be higher.
- Used car lots: They often offer bargains, but make sure to check the car’s history and condition carefully.
- Online marketplaces (CarMax, Carvana, Autotrader, Craigslist): They make price and model comparison easy. Some provide inspections and return policies, while peer-to-peer sites can have deals but need extra caution.
Checking multiple sources gives you more options and leverage when negotiating. Read reviews and make sure you trust the seller before committing.
Test drive the vehicle
Never skip the test drive. A test drive isn’t just about enjoying the ride. It’s your chance to see how a car really feels before you commit. While driving, pay attention to things like comfort, visibility, noise levels, braking, and acceleration. Notice how the car handles on different types of roads, from city streets to highways. If something feels off, it’s better to know now than after you’ve signed the papers.
Get an inspection
If you’re considering a used car, always get it inspected before buying. A professional inspection can reveal hidden problems, previous repairs that weren’t done properly, or potential issues down the road. It’s a small step that can save you a lot of headaches and money later, and it gives you confidence that you’re making a smart purchase.
Negotiate the Price
Once you’ve done your homework, you’re in a better position to negotiate. Many buyers can get the price lowered by 10 to 20 percent if they come prepared. Having a sizable down payment, being preapproved for a loan, or planning to pay in full can give you extra leverage. Don’t be afraid to speak up and make an offer that feels fair. You might be surprised how much room there is to save.
Complete the Purchase
Once you’ve agreed on a price, it’s time to make it official. Complete the purchase by:
- Preparing: Set your budget, check credit, gather documents, and line up insurance.
- Applying: Submit a loan application through the dealer, lender, or online.
- Reviewing and Signing: Compare offers, confirm terms, and sign purchase and loan contracts.
- Paying and Registering: Make your down payment or trade-in, complete registration, and finalize insurance.
- Driving Away: Once paperwork and payments are done, the car is officially yours.
Completing these steps ensures you can avoid surprises and drive away stress-free.
Enjoy Your New Car
Congrats! You navigated the budget spreadsheets, test drives, and negotiations, and now you have your first car. Whether you are cruising to work, road-tripping with friends, or blasting your favorite playlist in your driveway, take a moment to enjoy it. You earned this ride, and now the road is officially yours.