First Time Car Buying Guide

The dream of owning your first car makes it easy to forget all the other responsibilities that come with first-time car ownership. If you’re a teen, college student, or young adult and have never bought a vehicle before, you may have a few obstacles to overcome. If you haven’t already started building your credit history, you may have even tougher obstacles to overcome. Some car salesman will take advantage of your inexperience. They know first-time buyers don’t know how to maneuver and navigate through the car buying process and will attempt to take you for every dime you have.

Table of Contents

Who is a first time car buyer?

A first-time car buyer is anyone who has never financed a vehicle through a bank, credit union, dealership, or lender.

If you’ve bought a vehicle by paying for it with cash, you will still be classified as a first-time buyer in the dealer and lender’s eyes.

Paying cash for a vehicle does not help you establish your credit history or affect your credit score in any way.

Step-by-step walkthrough on how to buy a new car | New Car Buying Cheat Sheet

Must-Read Guides and Resources

How to Buy a New Car Below Factory Invoice Price – True dealer cost and the factory invoice price are not the same… dealer cost can be much lower.
Figure a Fair Profit New Car Offer – How to calculate a fair profit new car offer.
How to Buy a New Car Online – Not sure where to start? My step-by-step guide on how to buy a new car online.

Common first time buyer mistakes

The excitement of buying your first car can be overwhelming. All the different makes and models for you to select from, it’s like being a kid in a candy store.

Don’t let all the excitement cloud your judgment and make a huge financial mistake that thousands of first-time car buyers make every day. Below are a few of the most common car buying mistakes that are made by car buyers.

Most common first-time buyer mistakes when buying a car:

Paying too much for the vehicle.
Believing the dealership is there to help you.
Buying a previously damaged vehicle, the wrong vehicle, or both.
Buying a car that’s well over or stretches your budget.
Finance the vehicle at a higher interest rate than they actually qualified for.
Don’t read what they’re agreeing to.

Did you know?

Thousands of first-time car buyers purchase vehicles every year. Most of them end up with a bad vehicle or something they cannot afford. Not being able to pay for the vehicle or letting the vehicle go back will ruin your brand new credit history for years to come.

Buying your first car should not be rushed, take your time and do your homework and you will be sure to make a good buying decision.

Obstacles to overcome when buying your first car

Financing your first vehicle can be very difficult, lenders see you as a risk since you’ve not yet proven yourself responsible to pay back a car loan.

Other obstacles you will have to overcome include:

What will your fuel expenses be?
Where will you get an auto loan?
Budget for preventive maintenance like tire rotations, oil changes?
Have you saved money for your down payment?
How much car payment can you comfortably afford?
Have you compared insurance coverage and its cost?
Your interest rate will most likely be higher.

Understanding the car salesman’s job

Car dealers and their salesmen are professionals. Not all salesmen are crooks, some are very honest, hard-working, and just trying to make a living. You just never know who you’re going to end up dealing with.

Their job is to sell cars and they’re very good at what they do. There’s no reason for you to get mad at them. Just keep in mind, they’ll take every dime you have if you let them. Some of the realities of the car business include:

Sell you a car at the highest possible gross profit for the dealership.
Upsell you not needed high-profit aftermarket items.
Tell you whatever you need to hear to sell you a vehicle today.
Sell you high profit extended warranties and other insurance products.
Not to educate you, but to sell you something!

A dealer is not going to teach you how the car business works. Why would they, when they have a chance to make a pile of money from an inexperienced first-time buyer.

So what do you do? You’re already doing it by reading this article and not contacting a dealership until you’ve done your homework first.

Unexpected first car ownership costs

There are several factors to take into account with vehicle ownership. A few unpredictable costs would be replacing tires, batteries, chipped windshields, and any unexpected mechanical breakdowns. I’m not trying to kill your dream, as long as you plan for these costs, you’ll have nothing to worry about.

Nobody Plans To Fail – They Just Fail To Plan

Let’s take a look at three major expenses when owning a car, and average them over a month:

Example of one month of car ownership
$283.00	=	Average payment for a manufacturer's first time car buyer's program.
$164	=	Average car insurance payment for a 16-18 year old in 2018.
$280	=	$35 a tank, filling up twice a week.
$771.58	=	Total for one month of car ownership with No additional expenses.

To afford $727 a month you must work a minimum of 77 hours at $9.50/hr, before taxes, to pay the total ownership costs one month. Two 40 hour weeks will be enough to cover ownership costs and you’ll have money left over for any unexpected expenses.

You can’t rule out preventive maintenance on your first car such as oil changes, tune-ups, and tire rotations. Not doing these at the recommended times will shorten the life of your car, and may also void the extended warranty if something seriously goes wrong. In some states, you’ll have a few minor annual costs also such as registration, tags, and car inspections.

Good planning upfront will keep you out of financial trouble when buying your first car. Take a few minutes and write down all your current or future financial responsibilities such as rent, utilities, cellular phone, internet, and such.

Next, add your car ownership costs and stick to your budget. You may not be able to get a super expensive car the first time around, but if you’re smart, you’ll be able to get the car of your dreams shortly.

How to buy your first car

There are pros and cons to being a first-time car buyer. Some dealerships and manufacturers have special programs to assist you in the purchase of your first car. There may also be special rates and incentives available to you if you know where to look and how to find them.

Being inexperienced can be very expensive for you. If you buy the wrong car or pay too much, you’re not getting a second chance.

There is no such thing as a “Buyer’s Remorse Return Law,” once you sign on the dotted line, you’re an owner. Even if the vehicle breaks in half when you drive it off the lot. My point is, this is not the time to “fake” your way through the car buying process, car salesman will see right through you and eat you alive.

Car Price Quotes

Use my recommended tools to find the best deals in your local area.

Rydeshopper
Edmunds
MotorTrend

Find the dealer with the lowest price and save. When dealers compete = You WIN!

1) Selecting your first car

Selecting your first car is not only fun and exciting, but it can also be a huge task. You’ll want to get it right the first time because you’re most likely going to be driving it for a few years.

What’s important to you, safety, fuel mileage, 2 doors, 4 doors, truck, SUV? There are so many different makes and models available to you, it can be hard to choose. Don’t rush the selection process, it’s one of the most important steps.

If you’re considering a pre-owned vehicle, read my section on how to buy a used car. It will guide you through all the steps of the used car buying process and teach you how to effectively buy a safe and reliable vehicle at the best possible price.

If you’re in the market for a new vehicle as your first car, check out my new car buying tips.

Recommended New Car Shopping Sites

RydeShopper has one of the largest new car dealership networks in the world. Select the make and model you’re interested in and they will instantly search clearance pricing within your local area. Don’t forget to select as many dealers as possible to increase your chances for the greatest discounts and savings.

Visit RydeShopper >>

Edmunds is one of the oldest and best new car research and review sites on the internet. Their huge dealer network allows you to shop, research and compare millions of new cars so you can find the exact vehicle you're looking for.

Go to Edmunds Now >>

MotorTrend is one of the best kept secrets on the Internet. Best known for their automobile magazine, MotorTrend has a vast dealer network across the nation. Their referral service is 100% free and there’s no obligation to purchase. Just pick the vehicle you’re interested in, select local dealers, and receive discount pricing.

Search MotorTrend Vehicles >>

CarsDirect has been in online vehicle research business since 1998 and has all the right tools to help you find your next car, truck or SUV. They offer a no-hassle experience from configuring a car to making the final purchase. You’ll find your next car quickly and easily.

Browse CarsDirect Pricing >>

All Online Car Buying Tools

2) Know your credit history

Even though you’ve never financed a vehicle before, you should still review your credit reports and know your credit score before applying for a loan. You can make sure there haven’t been any mistakes reported to your bureaus, making it even harder for you to get approved for a car loan.

The key to paying the lowest interest rates in the future is establishing a rock-solid credit foundation now. I highly recommend you review your credit reports and scores frequently. You can correct any errors and misrepresentations immediately and also keep yourself from becoming a victim of identity theft.

The problem with companies that give you access to your credit report for free is they do not provide you with the most important piece of your credit report, your credit score. Your score is what you want to know and is what lenders use to determine if they’ll extend you credit for an auto loan.

Contrary to popular belief, checking your credit will NOT harm your scores. A good credit score is your golden key to acquiring competitive interest rates for credit card offers, insurance premiums, cars, mortgages, and more. A strong score is worth money because it can save you from paying higher interest rates and excess costs.

More car buying tips

Factory invoice is not a dealer's cost – Learn how to figure a dealer's true car cost on any new vehicle.
Calculate a new car fair profit offer – Calculate new cars fair profit to guarantee you are not overpaying on your new car.
Best time to buy a new or used car – Best time of the day, week, month, and/or year to buy a vehicle from a car dealership.

3) Get pre-approved

This is the most important area when buying your first car. The finance department of a dealership is where most of the fraud and deception can occur and can cause you thousands of dollars of excessive charges.

My advice is to use your down payment (the larger, the better) and attempt to get a pre-approved auto loan by yourself first. This may prove to be difficult, however, when it’s time to finance your next vehicle, having a paid auto loan on your credit reports in just your name carries a lot more weight than if you’re on a loan with someone else.

Use a Cosigner

If you can’t get an auto loan on your own, the next best thing is to do is get a cosigner. This is when you and another person are on the loan and you’re both responsible to pay it back. When someone cosigns with you, you will both equally establish credit. It may not be as powerful as getting approved by yourself, but it will still help you tremendously when buying your next car.

If you absolutely have to use a cosigner, the only people I would advise you to cosign with is one of your parents. I’ve seen many people cosign for their friends and co-workers and it’s never turned out good. Remember if you default on the loan your brand new credit history will be damaged and your parents will be left responsible for the debt.

Recommended online auto loan sites

MyAutoloan - will shop the best loan rates for you. You submit one free, no-obligation car loan quote through their secure web site and within seconds you'll receive up to 4 loan offers from their auto lending partners. You can select the one that provides you with the most benefits and savings.
Light Stream - is a division of SunTrust Bank. They believe borrowers with good to excellent credit ratings should be rewarded with low rates and excellent loan products. Once approved with LightStream, you can negotiate like a cash buyer with the funds in your account.
Auto Credit Express - was founded June 1, 1999. They are one of the leading bad credit auto loan providers in the US and Canada. If you have bad credit, no credit or been turned down for an auto loan because of a low credit rating in the past, chances are Auto Credit Express can help.
My Free Score Now - will allow you to receive all of your personal credit reports and scores from all three bureaus (Experian, Equifax, and Transunion) by signing up for their free trial.
View all car buying tools

4) Compare insurance rates

It’s illegal to drive a vehicle without insurance coverage. If you get pulled over without it, you will pay a hefty fine and could have your car impounded in some areas of the country.

Auto insurance is one of the most overlooked areas when buying a vehicle even for people who have bought several vehicles over their lifetime. It can be a real surprise finding out after buying your first car, your monthly insurance payment is actually more than your car payment.

Car insurance can be very expensive for young drivers, especially for teenagers. One factor is the age of the driver. The younger you are, the less experience you have behind the wheel.

The rate you’ll pay also depends on how new the vehicle is, the area you live in, the average miles you drive annually, and the type of vehicle you purchase. The more sporty the car, the higher the premium, the same rings true with engine size also. A policy on a new vehicle for a young driver is outrageously high.

Shop and compare coverage by getting a few free quotes online before making a decision. Once you find a quote on the vehicle you’re considering, add the cost to your monthly ownership budget.

If you find insurance coverage too high, there is a cheaper route. You can ask your parents to add you to their policy. Tell them you’ll pay the difference and whatever you do drive carefully.

My car insurance section will help you understand secret insurance discounts, insurance myths, and where to find free online rate quotes.

5) Protect your first car with warranty coverage

I have always recommended purchasing an extended auto warranty to protect your investment, especially if you’re purchasing a used car. However, I do not condone paying an outrageous price for one.

As a young driver, you may not be in a financial position to pay a $3200 repair bill to replace an engine. If your vehicle ever breaks down from a covered repair item, the warranty company will pay for the repair and you won’t have to come out of pocket.

Dealers have huge mark-ups on the extended warranties they sell. The good news is, you don’t have to buy a warranty from the dealer you buy the car from. You have several alternatives, but you must be careful because some of the auto warranties out there are not worth the paper they’re written on.

Extended warranties are an optional product. It’s ultimately your decision if you want to purchase one. Never let anyone tell you that you must buy a warranty before you’ll be approved for an auto loan, this is a lie and illegal. If a dealer attempts this scam on you, kindly thank them for their time and leave.

Recommended Auto Warranty Sites

Complete Car Warranty - provides you with an instant quote, unlimited repairs and is accepted at all dealers and mechanics.
Olive Mechanical Breakdown Insurance - offers free 60 second quotes easy monthly payments, cancel anytime, quote and buy 100% online.
View all car buying tools

In conclusion

One of the biggest mistakes people make is not doing their homework before buying a new or used car. These people blindly walk into a dealership, not knowing what they’re doing, and end up becoming a victim of the dealership.

I understand the advice on this page may make buying your first car seems like a nightmare. But it’s not really as scary as it sounds. Take it one step at a time.

By following the above tips and other advice on this site, you can buy your first car with confidence knowing you got a great deal. Good luck!

Learn faster - Insider car buying tips

Bad credit - low-interest car loans online – How to find low interest, poor credit, car loan quotes online.
Extended auto warranty buying tips – How to research, select, and buy an extended auto warranty without scams.
Selling a junk car online – A guide on how to sell a junk car online while getting more money than trading it with a dealership.

Recommended sites for online car shopping

RydeShopper, Edmunds and Motor Trend are the quickest way to compare new car prices in your local area. These online sites will provide you with free, no-obligation price quotes and the discounts you receive will give you confidence on your next new car purchase. Walk away from the dealership knowing you received a good deal, not hoping you did.

First Time Car Buying Guide

Who is a first time car buyer?

Common first time buyer mistakes

Obstacles to overcome when buying your first car

Understanding the car salesman’s job

Unexpected first car ownership costs

How to buy your first car

Car Price Quotes

1) Selecting your first car

Recommended New Car Shopping Sites

2) Know your credit history

3) Get pre-approved

4) Compare insurance rates

5) Protect your first car with warranty coverage

New Car Buying

Buying Used Cars

Car Trade-In Tips

Car Buying Guides

Extended Warranties

Auto Tool Reviews

Auto Cheat Sheet Insider