The thought of getting your first car typically triggers some feelings of excitement! You’ll finally be able to go places on your own, whenever you feel like it. You won’t have to rely on the bus, family, or friends anymore. But with a new car comes new responsibilities. That being said, there are some things you should know before buying your new vehicle.
What do you need it for?
We don’t want to put a damper on your mood by saying “don’t get what you don’t need” but…don’t get what you don’t need! If you live in an especially walk-able location or find that you’ll only need transportation occasionally then you may not need to purchase a vehicle for day-to-day needs. If this is the case, you may find that renting or ride-share services like Uber and Lyft could be more cost effective. Think about it. Why waste money on car insurance, maintenance, and car payments every month if you’re only going to drive your car a few times a week? You can save that money for things that you really need. However, If you find that you will need to drive daily, then it’s clear that a car is likely a good investment. Uber trips can add up!
Take a look at your budget
Now that you’ve thought about your day-to-day driving necessities and have found that it would be beneficial for you to buy a car, it’s time to set a budget. According to the American Automobile Association (AAA) there’s about six major costs of owning a car: gas, depreciation, finance charges, maintenance, insurance and licensing/registration fees. So what does it cost? For vehicles driven 15,000 miles a year, average car ownership costs were $8,469 a year, or about $706 a month, in 2017, according to AAA.
Gas
Your vehicle type will determine the fuel cost for your new vehicle, as costs vary significantly by vehicle type, ranging from 3.68 cents per mile (electric vehicles) to 13.88 cents per mile (pickup trucks). On average, new vehicle owners will spend a little over 10 cents per mile – about $1,500 annually — to fuel their vehicles.
Depreciation
Depreciation is based on the difference between the new-vehicle purchase price and the estimated trade-in value at the end of five years and 75,000 miles. Individual depreciation rates are based heavily on the make and model, total mileage, and even the condition of the car. This is an oftentimes overlooked expense when purchasing your first vehicle. In 2017, small sedans and small SUVs had the lowest annual depreciation costs at $2,114 and $2,840 respectively. On the other hand, minivans and electric vehicles ($5,704) are at the high end of the scale with $3,839 and $5,704 annual depreciation costs respectively.
Finance charges
For most people, they will need to take out a loan to pay for their first vehicle. With financing, comes interest costs. According to AAA’s study, the average finance charges are $683 per year, or $57 per month.
Maintenance and Tires
When you own a vehicle, it is your responsibility to maintain it. Most vehicles have recommended maintenance schedules that are used for best practice to maintain the health of your vehicle. However, a study by AA found that 35% of drivers have skipped or delayed these recommended services. This is not the best idea, as in the long run, properly maintaining your vehicle will usually save you money. Annual maintenance and tire costs are $942.
Insurance
Insurance rates are going to naturally vary depending on driving habits, insurance provider, ticket/accident history, gender, vehicle, state you live in and more. If you are considered a “low risk” driver your insurance costs will be less than someone deemed a “high-risk” driver by their insurance. Costs will also depend significantly on the amount of coverage in the policy you choose. On average, drivers spend $1,222 a year, or $102 per month on auto insurance.
Licensing, registration and taxes
These costs include all governmental taxes and fees payable at the time of purchase, as well as fees due each year to keep the vehicle licensed and registered. The cost of these also, usually overlooked fees is about $687 per year.
With all of these costs in mind, here are AAA’s average annual costs per vehicle type:
- Small Sedan – $6,354
- Small SUV – $7,606
- Hybrid – $7,687
- Medium Sedan – $8,439
- Electric Vehicle – $8,439
- Minivan – $9,146
- Large Sedan – $9,399
- Medium SUV – $9,451
- Pickup Truck – $10,054
Check your credit score
When you’re considering getting a new car, it’s a good idea to check your credit score. The better your credit score, the more money you may save when you purchase your new car. This is because car dealers want to see if they’re able to trust you to make payments on your car. A better credit score will qualify you for a lower interest rate on a car loan.
When Purchasing
Now that you have crunched some numbers and saved up the bucks to buy your new car, let’s look at some of the things you should ask yourself before actually purchasing your first vehicle.
- What other fees will I be charged? You want to know up front all of the fees that you’re going to be responsible for in regards to your new vehicle. You don’t want any surprises after the fact that put you over budget.
- How much is your documentation charge? A documentation or “doc” fee is what the dealer will charge you for filling out the contract. It seems strange, but it’s universal. What isn’t universal is the amount dealers charge for the doc fee. Some states cap the doc fee, usually priced below $100. Other states don’t regulate the fee, so it can be as much as $600.
- Are there any dealer-installed options on the car? Sometimes the dealer will add optional items to the purchase. Popular add-ons include nitrogen-filled tires, window tinting, wheel locks, all-weather floor mats, paint protection, and more. These are called dealer “add-ons” and the markup can be quite steep.
- How many miles are on the car? This is especially important for online shoppers. You might assume that every new car has less than 10 miles on the odometer but in some cases, the car might have gone on a lot of drives. The car could have also been a “dealer trade,” which means the dealer traded another car for it and it’s been driven in from another dealership. If there are more than about 300 miles on the car, you may be able to negotiate a lower price. If the car has been on the lot for a while or has a few hundred miles on it, you may want to ask for the “in-service date” of the vehicle. It’s usually on the date you buy the car, but not always. The in-service date is when the warranty begins, and it is important to know how much coverage you have.
- Can you deliver the car? This is another great question for online shoppers. If everything else in the deal looks good and you haven’t pulled the trigger yet, you could ask them to deliver the car to you to close the deal.
- Can I take it for a test drive? You want to really know how it feels behind the wheel. There are so many things to pay attention to while you are taking your test drive: seat height, wheel adjustment, steering feel, throttle tip-in, outward visibility, control layout and more. Ask to drive the car for at least 30 minutes so that you can really judge how you feel in the vehicle and if the sales rep doesn’t have that kind of time then ask when they will or look for another dealership that will have the time.
If you are buying used, the next set of questions are important to ask.
- Are service records available? Hopefully, the answer to this question is ‘Yes’. Check them out to see if the car was serviced regularly.
- How was the car maintained? Find out if it was serviced at a dealership, by an independent mechanic or a mechanic not affiliated with a garage. Ensure the maintenance is up-to-date.
- What is the ownership history? If the seller doesn’t really have many details about the car’s ownership history, that’s a warning sign. You want to buy a used car from a dealer who is knowledgeable about its history or, if for sale by owner, an owner that really cared about the vehicle.
- What features don’t work the way they’re supposed to? Older cars almost always have something wrong with them. They may not be deal breakers but you still want to know.
- Do you have the title in hand? If purchasing from the owner, a longtime owner might not know where the title is hiding, or the seller might not have the title if there’s an outstanding loan from the bank. There are ways to work around both of these issues, but knowing the status of the title early on will help you determine if the car is worth the extra time and hassle.
- Can I take it for a test drive? Just like we mentioned for purchasing a new car, ask if you can take the vehicle for a test drive. It’s okay to ask this even with a used car because you still want to make sure that the car is worth the money and that you’re comfortable in it.
Enjoy the process
We know that we just threw a lot at you but make sure you’re maintaining that excitement throughout the whole process. There is nothing like buying your very first car. You will likely buy a better quality car in the future, but it still won’t top the first car feelings. Don’t allow the length of the process or minor hiccups steal your joy throughout the process!