Buying Your First Brand New Car: A Guide for Millennials

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By

Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


, Contributing Writer - October 25, 2018

Buying your first new car is exciting, but it can also be a stressful experience. Next to a house, a vehicle is often the most expensive purchase consumers make. Considering it's your first time buying a new car, it doesn't hurt to be extra prepared. Whether you're a millennial that's finally ready to buy your first vehicle or a recent grad that just started a new job, this guide to buying your first brand new car should make you a savvier, more knowledgeable, and better first-time car buyer.

Know Your Credit Score and What's on Your Credit Reports

One of the first things you should do to prepare for buying a brand new car is check your credit. Your credit history may be limited if you're a first-time car buyer, but you still want to check both your credit score and reports to be in the know. Your credit rating directly impacts the interest rate you qualify for, while your credit reports provide a detailed overview of your credit history. You can use your credit score to research the interest rates others in similar situations qualify for, while you should check your credit reports for accuracy. Any errors can be disputed with the reporting credit bureau, and getting them removed can raise your credit score.

Set a Budget: Consider the Total Cost and Monthly Payment

Next, you want to set a car buying budget and stick to it – no matter what. Considering this is your first time buying a new car, the last thing you want to do is overextend yourself with an auto loan. Look at what you make each month compared to what you spend on your current bills, like rent/mortgage, utilities, food, loans, and credit cards, to figure out where a car payment fits in. A good rule of thumb is to spend no more than 10 to 20 percent of your monthly income on all expenses relating to car ownership, including the monthly loan payment, auto insurance, gasoline, and maintenance.

At the same time, you should consider the total cost of any car loan. You can extend the term of a loan in order to land a lower monthly payment, but this raises the total cost of financing because it increases the total amount of interest charges you pay over the loan term. The key to budgeting is finding the right balance between what you can afford each month and the total cost of the loan.

Get Pre-Approved for Financing

Millennials and other first-time car buyers can give themselves an advantage by walking into a dealership already approved for an auto loan. This way, you know what you're allowed to spend so you can stick to your budget, while the dealer may try to beat your financing rate with the lenders they're signed up with. This might not work out if you have a limited credit history, but you should go to your bank or credit union and apply. You could even apply with a few online lenders, but your chances of getting approved should be better if you have an existing relationship in good standing with your financial institution.

Figure Out What You Need in a Vehicle

It's easy to fall in love with the sleekest, best-looking models on the market, or for enthusiasts to get enamored with horsepower and torque numbers. But financing a car is a major expense, and you have to put practicality first.

To figure out which vehicle you should buy, consider what you're going to ask of it day in and day out, and identify features that you need. If you have a large family or haul a lot of gear, interior and cargo space should be the goals. If you have a long commute to work every day, a car with good fuel economy is probably a must. It's okay to consider a few things you want or think would be nice to have – these can be deciding factors when comparing models with similar features and attributes. But you have to understand the difference between needs and wants, and know that putting needs first is the practical thing to do.

Put in the Research

Use your list of must-have features from the previous step to identify vehicles that have them. Using the power of the internet, there's no end to the research you can put in. You can head to car buying websites (like the one you're on) to learn more about certain vehicles, compare similar car models to try to identify which has an edge, use expert and owner reviews to get first-hand accounts, and research vehicle pricing. The end goal should be to identify the vehicles at local dealerships you can afford that offer the attributes and features you need. You can even research dealerships beyond their inventory, taking a look at online reviews or asking friends and family for recommendations, to decide which you want to visit.

Take a Test Drive

With all of the research you can do online, it can be easy to forget about the physical aspect of the car buying process, but taking a test drive is still one of the most important parts. You need to make sure you feel comfortable behind the wheel and everything works and feels right. Closely check out the exterior and make sure all doors (and the trunk) open and close properly, get inside and check all buttons, knobs, windows, locks, etc. Then, get on the road and spend some time on the types of roads you normally drive. Your best bet is to test drive multiple cars from your target list, so you can compare your top picks against each other.

Don't Rush and Try to Enjoy the Process

All of the things you need to plan out and research can be overwhelming, but in the end, you get your own new car, which is rewarding. Make sure to take things slow, taking your time to consider all that needs considering and plan all that needs planning. Financing a car is a multi-year commitment, so the last thing you want to do is make a decision you aren't comfortable with.

Need Help Finding Financing?

Millennials and other car buyers without much of a credit history may struggle to get approved with a bank, credit union, or other direct lender. Even some car dealerships may not be willing to help you out, but CarsDirect wants to.

We work with a nationwide network of dealerships that specialize in helping car buyers in unique credit situations. The dealers we work with are signed up with lenders that understand and know how to work through credit issues, or a lack thereof. We'll work to match you with a dealership in your area if you submit out free and secure auto loan request form.

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, Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


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