4 tips for getting the best deal on your first car that I learned from working at a car dealership

first car shopping
The author is not pictured.

If you buy through our links, we may earn money from affiliate partners. Learn more.

I started my career writing about personal finance in an unlikely place: the marketing department of a car dealership.

In that job, I learned what not to do when buying a car, getting an auto loan, and negotiating. I learned where dealerships made their money, and how they price their cars, and it’s given me the ability to help people save.

Here’s the advice I’d give to anyone searching for their first car.

1. Figure out your budget before you even start looking at cars

Like buying a home, the shopping is always the fun part. But I strongly encourage everyone to sit down with a calculator and look at the numbers first. Decide on how much you can afford before you look.

There’s a simple formula for this, according to Mark Reyes, a financial planner at finance app Albert. “We typically say keep the total price of the car below 30% to 35% of your annual income. For someone earning $50,000 per year, that total price should not exceed $17,500,” he told Insider. “In regards to monthly payments, try not to go over 10% of your monthly income.”

Using these numbers as a guidepost, you can start shopping at a level that’s practical, instead of getting your heart set on a car you can’t afford.

2. Buying used is likely the best deal for your first car

I’ll say it now: I’m not a fan of buying new cars. They depreciate quickly, and can cost more to insure. As a first car, they’re not the most practical. And, they’re less likely to fit your budget.

Buying used is always my suggestion – you can find a car that’s a year or two old that’s just as good as new. Sometimes, there’s little or no difference between the newest model year and the previous. While the differences between model years will really depend on the car you’re interested in, the depreciation factor will be consistant.

While you do sometimes save on the financing with a new car (used cars tend to have an interest rate a percentage point or two lower than used), the amount you’ll save on a used car will likely make up for it.

3. Go into the dealership with your own financing and insurance

Financing and insurance are a big way that dealerships make money. Bringing your own insurance and financing can be an easy way to make sure you’re not paying more.

Car dealerships tend to add markups to financing, adding to the interest rate you’re offered. Instead of relying on the dealership’s financing, shop around with lenders, banks, and credit unions you work with. Get offers and compare them, paying attention to the interest rate and the length of the loan. Then, you’ll have a better idea of what interest rates you’re eligible for.

The same thing goes for car insurance – if you buy insurance at the dealership, it might come with an added cost. Do your own shopping to see what you qualify for. Get quotes from several car insurers in your area for the car you plan to buy, and compare the coverage types, limits, and costs.

4. After six months, shop for car insurance again

Along with your driving record, type of car, and where you live, among other factors, the length of time you’ve had coverage is also a factor in how much you’ll pay for car insurance coverage.

After six or more months of continuous coverage, your costs could go down. Repeat the process you used to shop for your first insurance policy after a few months, and you might find a lower price later. This can be especially helpful for new drivers who may have a high insurance price to start with.

Related Content Module: More on Car Insurance

Read the original article on Business Insider

Powered by WPeMatico

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Most Popular

To Top