If you're just starting out, your first car will probably be
your largest purchase to date. That makes it the most important
financial decision of your life. So you'll want to make sure to
choose a car that fits your budget, without sacrificing quality
or safety. Here are five things to consider when buying your
1. Be realistic
Most people don't buy a luxury car the first time around. You'll
want to set a realistic budget to meet your monthly payments.
Or, if you can afford it, you can pay for the entire car
upfront with cash. If you've managed to save enough or are lucky
enough have a windfall to spend, you can avoid car payments and
just calculate your budget for fuel, insurance, and maintenance.
Either way, think about whether you need any extra features, like
an extended warranty or special detailing, and skip those options
if you find them unnecessary or can't afford them.
2. Shop for auto insurance
Most states requires auto insurance. Typically, they'll require
just liability insurance, which covers damages and injuries to
the other driver if you're at fault. But you might want to go
with comprehensive coverage if you're buying a newer vehicle, to
cover yourself in case of damage. Base your decision on the
Level of coverage:
Decide what level of coverage you need, whether it's minimum
coverage, basic, extended, or premium. Depending on what level
you choose, you can have lower deductibles, or coverage for a
rental car, towing, glass repairs, and so on.
Sources such as A.M. Best can help you gauge whether a given
insurer will be reliable when it's time to make a claim.
Make sure you compare quotes across carriers to get the best
deal possible. A recent study by NerdWallet found that American
drivers on average overpay for car insurance by $368 each year.
Rates also can vary among carriers for the same location, so it
pays to compare. To make it easier to learn which insurance
company is likely to give you the best price, use features such
as NerdWallet's comparison tool, which gives you free estimates
without collecting personal information.
: Note your own interactions with insurers, as well as
information from your state insurance agency and other
customers (if they post online complaints, for instance), to
gauge the level of service you can expect from the
Look for discounts
: While the level of insurance you select should depend on your
financial situation, location, and vehicle, it's better to go a
little overboard than the other way around. That said, ask
about any discounts, such as those for automatic payments or
for driving below a certain mileage threshold, or any good
3. Find a co-signer
If you're in your early 20s or younger, you might need a
co-signer to get a car, because it's possible that your current
credit history won't qualify you for a loan on your own. Having a
co-signer might also help you get lower interest rates and better
terms. But remember that if you get a co-signer and you fail to
make your payments, the co-signer will be legally responsible for
the cost, so make sure you have enough to make your monthly
payments. A co-signer also might have to share legal liability if
you get involved in an accident.
4. Double-check used cars
Used cars are cheaper for a reason: They tend to have more wear
and tear. So it pays to be extra careful when choosing one. Be
sure to check the following:
- Research the vehicle's history via Carfax or a similar
- Carefully read the dealer's return policy.
- Check if the mileage disclosures match the odometer reading
on the car.
- See if the car has any recalled parts or safety defects by
checking the NHTSA's online database by using the car's vehicle
identification number. (Every car has a VIN.) If you see that
there were recalls made on parts of the car, ask the seller for
proof of the repairs.
- Have the car inspected by an independent mechanic before
5. Bring a second set of eyes
Whether you're intimidated by the thought of a high-pressure
salesperson or you're worried you'll lose self-control, strongly
consider bringing someone with you. A mechanic friend would be a
great choice, but even an experienced car-buyer like a parent
could be highly useful. He or she can help you remember details
about the car, figure out whether you're getting a fair offer,
and spot pros and cons you might miss.
Your first car should be a reliable vehicle that doesn't break
the bank. With this in mind, set a realistic budget and stick to
it. Also shop for insurance beforehand, so you know whether you
can actually afford a given car. Keep safety in mind as well,
especially when shopping for a used car.
Finally, bring a family member or friend with you to limit the
chance of making a poor decision. Doing that will also make the
purchase less intimidating, which should make things a lot
Read more from NerdWallet:
- Comprehensive Auto Insurance: Is It Worth It?
- Allstate vs. Geico vs. Progressive vs. State Farm: Which is
the Best Insurance Company for You?
- Esurance vs Allstate: Reviewing Top Insurance
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