If you’ve decided that your first car will be a brand new car, there are things you need to know about the buying and financing process that makes it different from buying a used car.
New cars – only from dealers All new cars must be purchased from state-licensed and manufacturer-authorized new-car dealers. It’s the law. It’s the only way you can buy a new car.
If a car has never been titled or registered, it’s considered to be a new car. Even if you initiate your purchase through an Internet car buying service, or through a buying service at warehouse stores such as Sam’s Club, the car actually comes from a local new-car dealer.
Assuming you’ll buy with a loan, you will want to have a monthly car payment that will fit within your current income, after considering all your other expenses. Don’t make the mistake of buying based on future expectations — a forthcoming raise, a new job, or other potential improvements in your finances. Your expectations might not come to reality and you’ll be stuck with a car you can’t afford. Base your purchase only on current, stable finances.
Let’s say you see a nice used car that you like on a dealer’s lot that is priced at $14,000. Is it a good price? Can I talk the dealer down to, say, $12,000? How much discount can I expect to get?
These are all common questions when shopping for used cars, especially if it’s your first car.
Let’s look at the answers.
Used car prices can vary greatly – even for the same make, model, year, and condition. Prices tend to follow the laws of supply and demand. Large gas-guzzling SUVs are cheaper in times of high gas prices. Convertibles are more expensive in sunny Florida than in cold North Dakota. Used car prices are cheaper when dealers have too many on their lots.
Dealers are experts at knowing local car-buying customers, what they want, and what they are willing to pay. They set their used car prices accordingly. However, dealers make more profit on used cars than on brand new cars. This means there is a lot of “wiggle room” in used car prices – a relatively large difference between what the dealer has invested in his cars and the prices he sets for those cars. Unfortunately, there is no way for us as consumers to know what a dealer has paid for his used cars.
Check prices to know what is fair
The first step to getting a fair price on a used car is to find out how much the car is worth. Is the dealer’s asking price fair or not? If not, then it is time for some negotiation.
Some newcomers to car buying assume that there is some kind of “standard” price for used cars. It is not true. However, there are used-car pricing guides, such as Kelley Blue Book and NADA Guides, that compile data from a variety of sources to publish their version of suggested prices, based on make, model, year, equipment, mileage, condition, and region of the country.
These guides often differ significantly in prices for the same vehicle, same mileage, same everything. Confused car buyers often ask, “Which is right?” or “Which is more accurate?” Neither is more right or more accurate. However, the guides serve as a good benchmark for determining a fair price for a car you may be considering to buy. For example, if a dealer is asking $14,000 for a car that the guides show as only being worth $10,000, he’s asking too much and it’s time to negotiate a fairer price.
If you don’t check prices
We’ve seen questions from car buyers who ask something like, “How much can I talk a dealer down on this $14,000 car?” The answer to the question is really another question. It is not so much how much you can talk him down, as it is how much is the car worth?
For example, a dealer may put a $14,000 price on a car that is worth only $10,000. He hopes that he’ll get a customer who hasn’t done her price research and who will “talk him down” to $12,000. The customer is happy because she thinks she got a $2000 price discount, and the dealer is happy because he sold the car for $2000 more than it was worth.
Asking prices are not selling prices
Nearly all used cars are sold for a price that is less than the original “asking” price. Dealers post asking prices on used car window stickers. Individuals selling used cars advertise them with asking prices. Dealer asking prices may be 20% or more higher than selling prices. Individuals usually price their cars about 10% higher than the price they are willing to accept.
Negotiate based on car’s condition
If you find a car you like and the price seems fair for a car in good to excellent condition, make sure you get a mechanic’s inspection and have the mechanic document any problems he finds. Assuming the problems are not serious enough to stop you from buying the car, use the mechanic’s report to negotiate for a lower price.
Also get a Carfax vehicle history report and do the same thing. If the car has been in an accident, even if the repairs have been done expertly, use the information to try to get a better price.
Where to buy
Used-car dealers are an obvious source of used cars but it takes time to visit and find out which ones have cars you might be interested in. One way to save time is use an online site such as UsedCars.com that lets you search for discounted cars from dealers in your area.
If you prefer to buy from a private seller individual instead of a dealer, we suggest you look at the eBay Motors web site for a list of .
If you have less-than-perfect credit, your car buying choices may be limited to dealers, such as Drivetime.com, who specialize is dealing with people with credit problems. They have dealerships around the country.
Should I keep my old car and fix it up, or buy a new car?
Expressed another way, the question is this: Is it smarter, more practical, and more economical for me to keep and fix my old car than to buy another car, new or used?
This is always a tough one to answer. Generally, it’s going to be better to fix up an old car than buy a new car every five years or so.
However, the real answer depends on your particular circumstances. Here are some tips that will help you make a decision.
Most of us get our first car as teenagers. It’s the car we’ll always remember.
Let’s take a look at some of the important questions you’ll want to consider when deciding about what you’ll buy as your first car, how you’ll pay for it, and how to go about the purchase.
How much can you spend?
If cost is not important and you can choose practically any car you want, we’ll get to you later. However, most teens have restrictions on how much they can spend. It might be that parents are buying and have set a price limit, or that you have your own budget and limited income.
What is the best first car for a teenager? There are literally thousands of combinations of different automobile types, makes, models, styles, and prices, which can make it difficult to choose. However, we will help you determine the perfect car for your needs.
What is a good first car? Which car is the best buy? Which is more reliable? Which gets the best gas mileage? Should I buy a SUV or pickup? Which car is safer? Which is more economical? Which is cheaper to insure?
Obviously, you know that new cars can only come from new-car dealers, but used cars can come from a variety of places including private individual sellers, car dealers, automotive web sites, classified ad sites, and even public car auctions.
From private party sellers
You can buy a used car from an individual seller - someone who owns a car they no longer want. These people may advertise their cars in a number of ways. Some simply place “for sale” signs in the windows. Others may park the car in an abandoned parking lot or consignment lots with a “for sale” sign and contact information. Others may advertise in newspaper classifieds or “autotrader” magazines available free at supermarkets and auto parts stores. Others may place ads on online sites such as , AutoTrader, and UsedCars.com.
Is it possible to get a car loan and buy a car with no credit?
The answer? Yes, under some conditions. Let’s explain.
It is a common situation, especially with young people who have never had a loan, never had credit cards, or never borrowed money for a car. Without a history of prior loans and payments, there is no credit history and no credit score, which is the number that represents credit rating.
In fact it is not quite sufficient to simply have a good credit score to get a car loan — or any loan. You may also need to have an established steady income (a job) and no excessive debts. You should have no recent bankruptcies or auto repossessions, which you wouldn’t be likely to have anyway if you have no credit.
So how is it possible to buy a car with a loan when you have no credit record and no credit score?
In the U.S., drivers must be licensed to legally operate motor vehicles. Each state has its own licensing laws that set requirements, terms, and procedures. Minimum age is typically 16 years old, but can vary by state. Most states have special learner driving permits that serve as temporary licenses. Young drivers have have restrictions that restrict time of day for driving, who must be in the car with the driver, how many passengers can be in the car, and certain other conditions. Failure to follow the laws can result in license suspension.
The state agency that provides driver’s licenses is the Department of Motor Vehicles (DMV). In some states, the agency may have a different name, such as Department of Driver Services (DDS). Licensing laws and procedures for each state can be found at DMV.org.
In order to obtain a driver’s license, certain tests must be passed — a vision test, a written test, and a driving test. Some states provide sample test questions either in a license test study manual or on the state’s DMV web site.
License holders are provided with a photo ID card that serves as legal proof of being licensed. The license must be in the driver’s possession when driving.
Driving Responsibly
Your car exposes you to laws that you wouldn’t otherwise be concerned with. At the low end are parking laws and speed limits. Some laws determine who is at fault in accidents. and how you should conduct yourself on the road. Other laws are more serious, such as those dealing with DUI and vehiclular homicide. Breaking driving laws can result in not only criminal charges but also personal liability charges.
Driving Laws
All states have rules of the road, the laws that determine what you can and cannot do while driving. Speed limits can vary, turn-right-on-red laws can be different. Since each state sets its own laws, the laws can differ considerably between states. If you move from one state to another, or travel to another state, you should become familiar with the new state’s laws.
Insurance
Most states have laws requiring automobile insurance. A minimum level of liability insuance is usually required, although comprehensive and collision coverage is not. Other states have financial responsibility laws that may not require insurance but you must prove you have the ability to pay in at-fault accidents.
Vehicle Registration and Tags
Motor vehicles must be registered to establish legal ownership and responsibility. Registration is typically handled at the state or county level. Metal tags are issued to be displayed on the vehicle. Registrations must be renewed each year. Fees and taxes are collected at the time of renewal. States have varying laws regarding how tags may be transfered between vehicles. Sales tax is usually paid at the time of vehicle registration.
Emissions Standards and Laws
State and Federal laws require that automobiles meet certain standards. California is particularly strict. All new cars must be built to meet Federal and state requirements. Many states and counties have annual inspection procedures to test emmissions and safety compliance.
Sales Tax
In most states, sales tax must be paid for new and used vehicle purchases. Vehicles moved from another state may also be taxed. Tax laws vary considerably between different states, especially regarding credits and refunds for taxes paid in another state. Some states also allow for sales tax credit on trade-ins at dealers.
Property Tax
Many states and counties impose an annual property tax on motor vehicles. The tax is generally based on the value and age of the vehicle. The owner of the vehicle is responsible for the tax. For leased vehicles, the tax is paid by the lessee (the party who is leasing and driving the vehicle).
