Tips for buying your first car on a budget
Buying your first car can be as exciting as it is daunting. Although the freedom that a vehicle affords you is invaluable, it’s not a purchase that you should take lightly.
Used and new auto prices are still high throughout Canada, according to reports from CTV News and AutoTrader.ca. This means that you’ll need to look a bit harder to find a good deal.
If you know what to look for, deals can still be found. However, if you’re uninformed, you can just as easily get ripped off.
Whether you’re buying a car off the lot from a dealership or purchasing a car in a private sale, there are a few basic tips that you should always keep in mind:
-
The salesperson isn’t 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 an unfavourable loan
Below, I’ll go over these key points and share some other practical tips for first-time car buyers on a budget so that you can find the best deal.
1. Research price ranges for the vehicle you want
If you’re shopping for your first car, you likely already have a few different vehicles in mind. Before you visit the dealership or look at local private sales, I recommend visiting Kelley Blue Book’s website to do some initial price research.
Simply enter the car’s year, make, and model, and the website will show you the average price range that you should expect to pay for it. This is great information to have while you’re shopping, as it will help you determine whether or not you’re getting a good deal.
2. Look for minor imperfections in the vehicle
One of the best ways to convince a seller or auto salesperson to come down on the price of a vehicle is to point out small imperfections. Look for imperfections, such as:
-
Paint chips -
Minor dents or dings -
Scratches -
Peeling clear coat -
Scrapes on the wheels
None of these affect the overall performance of the car, but they’re a useful negotiation tool that can convince the seller to reduce the price a bit.
3. Shop towards the end of the year (closeout sales)
Have you ever realized how dealerships run the best sales during the holidays? That’s because major dealerships are trying to liquidate the previous year’s inventory to make room for the latest models arriving in January.
If you plan on buying a new or certified pre-owned vehicle from a dealership, the holidays are the best time to shop. Private sellers may also come down on their prices, as they might be looking for quick cash so they can buy gifts for their 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 that you wouldn’t purchase otherwise.
The best way to save money on your first car is to negotiate the price down. This works better with private sellers than at dealerships. However, most dealers are also willing to negotiate (although you may have to speak directly to a sales manager to get the deal).
5. Ask for service records and car history reports
Saving money upfront doesn’t mean much if the vehicle breaks down on you a few months later. That’s why you should always ask the seller or dealership for the car’s service records. In particular, you’ll want to ensure that the oil was changed regularly.
This can also show you whether or not the vehicle has had major work performed on the engine block, transmission, or cooling system. Recent work is usually a good sign, as it shows that major issues were taken care of, so you don’t have to worry about them.
A car will also have a history of any accidents that it has been in that have had any insurance claims, so see if the owner of the vehicle has access to those records. If they don’t have one, you can buy a report from a third-party provider.
If the vehicle has been in an accident, this can be a good negotiation tool for you to bring the price down.
6. Inspect and drive the car with a mechanic
Even if the car is sold with impeccable service records, you should still get a mechanic’s input. If you have a friend or family member who’s a mechanic, ask them to come along with you to the car lot to do a brief once-over and accompany you on the test drive.
The mechanic’s trained eyes and ears should be able to identify any major issues before you hand over your money.
Many shops are also willing to perform a pre-purchase vehicle inspection for a small fee as well.
7. Negotiate your interest rates
Dealerships often entice first-time buyers by offering them deals and clever perks, such as:
-
No payments for 60 days -
Extremely low or no down payments -
Free oil changes for a year -
Free satellite radio for a year
If you’re only focused on the upsides of the deal, it can be easy to overlook the fact that your interest rate may not be the best. Interest rates can mean the difference between thousands of dollars over the course of your loan. Not everyone knows that it is something that you can negotiate with a dealership, so try your best to haggle it down.
If you want to find the best deal on your first car, I recommend shopping around a bit. Don’t buy a car on an impulse or let a salesperson pressure you into buying on the spot. Look at multiple 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 tips for thousands of daily Canadian readers on his Wealth Awesome website.
Do you have a question, tip or story idea about personal finance? Please email us at dotcom@bellmedia.ca.