Tips for buying your first car on a budget
Buying your first car can be as exciting as it is daunting. While the freedom a vehicle gives you is essential, it’s not a purchase you should take lightly.
Used and new car prices are still high across Canada, according to reports from CTV News and AutoTrader.ca. This means you’ll have to look a little harder to find a good deal.
If you know what to look for, deals can still be found. However, if you are not informed, you can get ripped off just as easily.
Whether you’re buying a car from a dealership or a private sale, there are some basic tips you should always keep in mind:
- The seller is not your friend (don’t be afraid to negotiate!)
- Always get input from a mechanic before handing over cash
- Don’t buy on impulse
- Don’t get trapped in a bad loan
Below, I’ll go over these key points and share some other practical tips for first-time car buyers on a budget, so you can find the best deal.
1. Research the price ranges for the vehicle you want
If you’re shopping for your first car, you probably already have a few different vehicles in mind. Before visiting the dealership or looking at local private sales, I recommend you visit Kelley Blue Book website to conduct an initial price investigation.
Just enter the year, make and model of the car, and the website will show you the average price range you should pay for it. This is great information to have while you’re shopping, as it will help you determine if you’re getting a good deal.
2. Look for minor defects in the vehicle
One of the best ways a dealer or car dealer can lower the price of a vehicle is to point out minor defects. Look for errors such as:
- Paint the chips
- Small scratches or dents
- Clear coat bleaching
- Scratches on the wheels
None of these affect the overall performance of the car, but they are a useful bargaining tool that can convince the seller to lower the price a bit.
3. Purchases towards the end of the year (end sales)
Have you ever noticed how dealerships make their best sales during the holidays? As such, major dealerships are trying to liquidate the previous year’s inventory to make room for the latest models arriving in January.
If you’re looking to buy a new or used vehicle at a dealership, the holidays are the best time to shop. Private sellers can also lower their prices, as they may be looking for quick cash to buy gifts for friends and family.
4. Don’t be afraid to negotiate the price
Remember salespeople are not your friends and family. Don’t let their golden smiles and friendly compliments sway you into buying a car you wouldn’t have bought otherwise.
The best way to save money on your first car is to lower the price. This works better with private sellers than dealerships. However, most sellers are willing to negotiate (although you may need to speak directly with a sales manager to get a deal).
5. Ask for service records and car history reports
Saving money up front doesn’t mean much if your vehicle breaks down a few months later. This is why you should always ask the seller or dealer for the car’s service records. In particular, you want to make sure the oil is changed regularly.
This will also show you if the vehicle has had major work done on the engine block, transmission or cooling system. Recent work is usually a good sign as it shows that the main issues have been taken care of, so you don’t have to worry about them.
A car will also have an accident history of any insurance claims, so see if the vehicle owner has access to these records. If they don’t, you can purchase a report from a third-party provider.
If the vehicle has been in an accident, this can be a good negotiating tool to lower the price.
6. Have your car inspected and driven by a mechanic
Even if the car is sold with excellent service records, you should still get an input from a mechanic. If you have a friend or family member who is a mechanic, ask them to come with you to the car shop to do a brief and help with the test.
The mechanic’s trained eyes and ears should be able to identify any major issues before handing over the cash.
Many shops are also willing to pre-inspect vehicles for a small fee.
7. Negotiate your interest rates
Dealerships often attract first-time buyers by offering smart deals and benefits, such as:
- No payment for 60 days
- There are very low or no payouts
- Free oil change for one year
- Free satellite radio for one year
If you only focus on the good side of the deal, it can be easy to forget that your best interest rate isn’t there. Interest rates can make a difference of thousands of dollars over the course of your loan. Not everyone knows that this is something you can negotiate with a dealer, so try to hire as best you can.
If you want to find the best deal on your first car, I recommend shopping around. Don’t buy a car on impulse or let a salesperson pressure you into buying on the spot. Look at the various options, weigh the pros and cons of each, and make an informed decision based on your budget and needs.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance advice for thousands of Canadian readers every day Wealth Awesome website.
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