The college grad’s car buying guide
There are several milestones you’ll experience as a young adult. College graduation. Your first job. Your first “adult” apartment. Perhaps the most exciting is buying your first car.
If you’re navigating the process for the first time, there are some steps to remember. From budgeting and research to obtaining a loan and auto insurance, we cover every step, so you stay on the right path.
Step 1: Determine your budget
The first thing you need to determine is how much you can spend. You’ll need to know how much you have for a down payment and how much you can afford for the monthly payments.
Don’t forget to include other ongoing expenses, such as auto insurance, gas, and maintenance and repairs. The total should be a reasonable percentage of your entire monthly budget for things like rent, food, clothes, and entertainment. Many financial experts recommend that your car-related expenses should be no more than 15% – 20% of your total budget.
Step 2: Choose the right car
Obviously, there are many options when it comes to cars. You can start by deciding what type of vehicle you want, ranging from sports coupes and sedans to SUVs and trucks.
The kind of car you choose will depend on several factors:
- Price and financing options
- Safety ratings
- Commute to work
- Lifestyle and needs
- Features and technology
- Value of the car over time
You can start narrowing down your options by researching different brands and models on popular websites like AutoTrader.com, Kelley Blue Book, Cars.com, and Edmunds.com.
Pay attention to trim levels
If you’re new to the world of car buying, there are three words to keep in mind: Make, model, and trim.
- Make: The company or brand, such as Honda, Ford, or Toyota.
- Model: The actual name of the car, such as a Honda Accord, Ford Mustang, or Toyota Corolla.
- Trim level: A model’s set of special features. These might include things like safety features, navigation, and other things, such as the quality of interior materials.
Trim levels are designated by a combination of numbers/letters such as EX or LTZ or names such as Touring or Platinum.
You might also see different “styles,” which denotes the type of car, whether it’s a 2-door coupe, 4-door sedan, or convertible. It might also indicate the type of engine and drivetrain. Some trim levels offer different styles. For instance, you might see a trim that offers either front-wheel drive (FWD) or all-wheel drive (AWD).
Step 3: Decide on new versus used
In some cases, it makes sense to buy a used car. There is still a negative stigma attached to used cars, but there are plenty of quality, pre-owned vehicles out there.
You can even buy a higher quality used vehicle than if you bought the same model as new. You might also enjoy lower insurance rates, which will be better for your wallet.
Step 4: Obtain financing
Unless you have enough cash to pay for a car outright, you will need to get an auto loan from a bank, credit union, or other lending institution. You can obtain financing before you go to the dealership or use their lender.
It’s important to have a good credit rating, so be sure to check your credit score. A high credit score translates to lower interest rates, which means you will pay less for the car over time.
Step 5: Don’t forget auto insurance
Finally, you will need to find auto insurance. If you’ve been on your parents’ policy until now, this will be a big milestone as well.
Look around and compare prices to find the best deal. You can expect to pay a higher rate, as insurance generally costs more for drivers under 25. If you have a history of accidents or traffic violations, your rate may also be higher.
The type of car you buy will also affect your insurance rates. An older model might cost less, for instance. Certain models also come with higher rates, generally because they’re involved in more accidents.
If you’re looking at buying your first car, speak to an insurance specialist about the best policy for your needs. If you have any questions or you would like a quote, contact us today.
This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.