Purchasing your first car is among the first significant purchases most people make. It is an exciting but rather tricky process that requires you to research widely, understand your needs, and stick to a budget.

Before you go shopping, take your time to understand your options, the different car models, costs, and requirements to be pre-approved for a car loan. Below are ten tips that will make the process smooth and free from hurdles.

1.     Establish a Budget

The ideal way to purchase your first car is by paying cash. Though this is not the reality for many, you are here because you need to leverage financing. Create a budget by calculating all your monthly income versus expenses. With this, you can identify areas where you can cut back and have more money for your car payment every month.

On average, as a first-time car buyer, you should aim to spend less than 10% of your monthly gross income on car expenses and payments. Meaning, you should not neglect to budget for other car expenses such as gas, maintenance and repairs, insurance, and parking.

2.     Do Your Homework

With an idea of your budget, research on cars within your price range. Research the things that are most important to you, whether that is safety or the auto type. Look for discounts and consider different options, such as new, used, or certified pre-owned.

If you are looking into new cars, check out multiple dealers, and ask for price quotations. When it comes to used cars, don't forget to search for reports on the vehicle's history, including any record of flood or accidents, and inquire about the warranty.

3.     Work on Your Credit Score

Your credit score will give you a clue of the finance terms you qualify for even before you seek financing. A good credit score also sets you up for better interest rates. 

You can get your credit report from your credit card providers, or credit bureaus. If your credit score is not looking great, take your time and improve it before seeking financing.

4.     Save for a Down Payment

Just like buying a house, a 20% down payment is recommended. With this portion as a down payment, you never owe more than your car's worth, and it may earn you better terms that save your coins in the long run. The amount you pay also affects the interests and monthly payments.

5.     Assess Your Financing Options

Auto dealerships and third parties like banks and credit unions offer auto loans. What you may not know is that the auto dealers have additional costs for handling your credit. Hence, the third party lenders often offer better loan terms and give you negotiating power to evaluate whether the seller matches the loan terms.

Consider applying to multiple lenders and doing it within a short period to get the best terms. Once you decide on a lender and are pre-approved, you can present the loan amount and conditions to the dealership.

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6.     Limit the Loan Time

Take caution of longer-term car loans. According to npr.org, one-third of new car loans are longer than six years, which is a dangerous trend. With longer loan terms, you pay a lot more interest with lesser monthly payments. They also have a front-loaded interest policy where you start paying more interest than the principal in the early years.

7.     Mechanic Inspection

It is especially important if you decide to go with a used car. Have your friends and family recommend a good mechanic to do a thorough vehicle inspection before buying it. 

The inspection should focus on both significant and small issues like potential problems and shoddy repairs. Even if your dealership provides a mechanic, ask them for a written report that you will pass on to your mechanic.

8.     Enjoy the Test Drive

Although you like the car while on the lot, you can only know if it's for you when you hit the road. Call the dealerships you intend to work with and make test drive appointments at different times during the same day. It gives you a more natural basis for comparison.

9.     Finalize the Deal

Now that you have everything you need; the financing and the car of your choice, it is time to sign off the purchase agreement. Negotiate prices beforehand, read your contract carefully, and ensure you clearly understand all the terms and warranties provided.

Before signing, ask any questions and even have a trusted advisor enlighten you on anything that is not clear. Finally, sign that contract.

10. Make the Most of Your New Car

Now, that you have the keys to your first car make it a worthy purchase by enjoying it as much as you can and don't forget to service regularly.

Following these tips will make the process smoother than it is for most. Also, remember to sign up for an automatic bill so you can never miss a payment.

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