First-Time Car Buyer's Guide

Buying your first car is an exciting milestone, but it's also an important financial decision that requires preparation and planning. Start by assessing your finances and creating a budget. From there, research your options, decide whether to buy new or used, understand your financing options and know your rights. These steps will help you make informed decisions throughout the car-buying process.

To determine how much you can afford to spend on a new car, start by calculating your income and listing your expenses. This will show where you have flexibility or areas to cut back, helping you decide if a car fits your budget.

When calculating the total cost of car ownership, think beyond the sticker price. Remember, car costs are ongoing, even after purchase. Below are steps to help you determine how much you can spend on your first car and its related expenses:

One of the biggest decisions when buying your first car is whether to buy a new or used vehicle. Both have pros and cons — the right choice depends on your budget, needs and long-term goals. New cars offer the latest features and warranties, but the price of new cars is often higher. Used cars are more affordable upfront, though they may require more maintenance.

Below is an overview comparison of new and used cars to help guide your decision:

First-time buyers should prioritize finding a car that balances reliability, cost and functionality. Understand why you need a car and how you'll use it. Whether you need a compact car for city driving, an SUV for family trips, a fuel-efficient car for long commutes or even an electric vehicle for eco-friendly driving, knowing your priorities will make your search more focused and less overwhelming.

Below are key considerations when finding your ideal first car:

• Purpose: Will you use the car for daily commuting, road trips or both?
• Size: Do you need a compact car for city driving or a larger vehicle for people and cargo?
• Fuel Cost and Efficiency: How important is gas mileage based on your driving frequency, distance and budget?
• Safety: Check safety ratings from trusted sources like IIHS or NHTSA.
• Resale Value: Some models hold value better over time, which is important if you plan to sell or trade them in later.
• Technology and Features: Do you need advanced features like Bluetooth, backup cameras or driver assistance systems?
• Maintenance: What are the maintenance costs and reliability for the model you're considering?

After deciding on the type of car you want, the next step is choosing where to buy it. As a first-time buyer, find a place that offers reliability, transparency and support. Below are some recommended places to find your first car, each with its own advantages:

Your payment option will affect your budget, monthly expenses and overall financial health. Consider getting pre-approved for a loan to compare interest rates. First-time buyers with little credit history might benefit from exploring credit unions or first-time buyer programs.

Keep in mind that a higher credit score will get you better rates. Weigh the pros and cons of each option to find the one that best fits your situation. Depending on your budget and preferences, you might opt to pay upfront, take out a loan or explore leasing. Explore the most common options for financing your first car:

Whether you're navigating loan agreements, warranties or dealership negotiations, knowing these terms will help you avoid misunderstandings and potential pitfalls. You'll feel more confident throughout the purchasing process if you're familiar with these most common car-buying terms before purchasing or negotiating.

Before finalizing your car purchase, inspect and test-drive the vehicle. Whether buying new or used, these steps help ensure the car meets your performance, safety and comfort standards. Inspections can reveal hidden issues for used cars, while test drives show how the car is handled. For new cars, it's about confirming everything works as expected.

Here are some key questions to ask yourself during the inspection and test drive:

• Are there any visible signs of damage, such as dents, rust or paint inconsistencies?
• Does the car's interior show excessive wear, stains or odors?
• Are the tires evenly worn, and do they have enough tread?
• Are there any leaks under the car after it's been parked for a few minutes?
• Is the engine clean and free of strange noises or smells?

When purchasing a used car, the test drive helps identify potential mechanical issues and assess the overall condition. An inspection of the vehicle can also help you avoid buying a car that will require immediate repairs. Here's what to look for when inspecting and test-driving a used car:

The inspection process for new cars is generally simpler, as the vehicle should be in excellent condition. However, ensure that everything works as expected and that the car fits your needs.

After finding the car you want, the next step is negotiating the price. Dealers often expect buyers to negotiate, especially for used cars and may have flexibility on pricing. Being prepared, knowing the market value and understanding the negotiation process will help you secure the best deal.

When buying a car, you'll encounter two types of coverage: warranties and auto service contracts. While they seem similar, they serve different purposes. A warranty is typically included with a new car and covers specific repairs for a set period or mileage, protecting against manufacturing defects.

Auto service contracts, sometimes called "extended warranties," are technically different but often provide similar coverage. Both offer protection, but the following chart outlines key differences between them.

Buying your first car can bring up a lot of questions. Below are some other frequently asked topics regarding the car-buying process: