Choosing and Buying Your First Car A How-To Guide for a College Student with a Budget up to $10,000

By: Ashley Stensgard

Table of Contents iii

Table of Contents

Table of Contents ......................................................................................................................... iii Introduction ................................................................................................................................... v

Chapter 1: Choose an Affordable Car Type ............................................................................. 3

Necessities over Desires ............................................................................................................. 3

Set Your Budget .......................................................................................................................... 4

Payment Options ......................................................................................................................... 6

Contact a Loan Officer................................................................................................................ 6

Chapter 2: Dealership vs. Private Party Purchases .................................................................. 9

Find Used Cars for Sale ............................................................................................................ 10

Cars from a Dealership ......................................................................................................... 10

Cars from a Private Seller ..................................................................................................... 10

Test Drive.................................................................................................................................. 11

Chapter 3: Buy the Car ............................................................................................................. 15

Negotiate ................................................................................................................................... 15

Conclusion ................................................................................................................................... 17

Works Cited ................................................................................................................................. 19

Index ............................................................................................................................................. 21

Introduction v

Introduction

Are you finally ready to purchase your very own car?

How do you find the car that will exactly suit your needs for years to come? It just takes a little research and planning. The following steps will help you know what to look for when choosing an affordable car, and how to test drive the vehicle that is best for you.

Buying a car can be one of the most exciting yet most anxiety-filled purchases students will make in their lives, so it is important to get it right. In this manual you will learn how to successfully plan and research the purchase of a used car for a maximum budget of $10,000. Topics include focusing on what you need in a car, financing the car, and listing the pros and cons of purchasing from a dealership versus a private party seller.

Chapter 1 Choose an Affordable Car Type

Chapter 1: Choose an Affordable Car Type 3

Chapter 1: Choose an Affordable Car Type

Necessities over Desires When deciding on what car is best for you, it’s best to think about what you need now as well as what you’ll need in the future, not just what you want and what looks flashy.

Here are some questions to consider:

• How many passengers do you need to carry: four door or two door car?

• What type of driving do you do: highway, city streets, off road?

• What is the weather like where you live: will you be driving in the ice or snow?

• Do you have a long commute to

campus or work, and is fuel economy

important to you (MPG)?

• Do you need four wheel drive?

• What safety features are important to

you?

• Do you need a lot of cargo space?

• Do you have kids and need a back seat

that can fit children’s car seats?

Tip: Make sure the car has a clean title.

While looking at different used cars, it is important for the cars you are looking at to have a clean title. A clean title means that the car has never had a salvaged title before meaning it has no major recorded damage. You also want to make sure the car is paid off and free of loans or liens.

Now that you know what to look for when deciding on a car, you are ready to set your budget and find out how much money you can spend on a car.

4 Choosing and Buying Your First Car

Set Your Budget How much money can you afford to pay for a car payment each month?

It is sometimes hard to know the answer to this question right away. You don’t want to pick a number that is way too high and unrealistic, but you also want to buy the best car you can so you don’t want to pick a number too small.

Tip: A general rule for a monthly car payment is no more than 20 percent of your monthly income.

Make sure to only take 20 percent of your spending money, meaning after you’ve already paid bills, bought the groceries, etc.

If you are having trouble estimating how much you can afford for your monthly payments on a car, you can go to Edmunds.com and use the Edmunds Car Affordability Calculator. This tool will keep you from getting in over your head, and will ask you some basic information so it can estimate a price range you can afford. Once completed, this tool will even list cars that will fit your budget.

Go to Edmunds.com and scroll down until you see Calculators and click on it. Then in the third box you should see the question, “What can I afford?”. Enter a number you think you can afford and click go.

Home > Car Tips & Advice > Calculators > Affordability Calculator

The next page will show you the affordability calculator, and further explain some things you put into it and some things you’ll get out of it.

Chapter 1: Choose an Affordable Car Type 5

A few things that go into the calculation: Loan Term: It is recommended to finish your financing in about five years. The shorter the loan, the higher the monthly payments will be, and the longer the loan, the higher your interest will be. If you have a pre-approved car loan from your bank, input it in the Loan Term box. Cash Down Payment: Try to put down as much as you can afford. Shoot for at least 20 percent of your budget. This reduces the size of your loan, making your monthly payment even smaller.

A few of the results you'll get:

Sticker Price Range: This is the range of sticker prices that you should shop. Keep in mind that most cars can be purchased at a discount from the sticker price. Finance a car whose sticker price is at or under the highest number in the range. At the bottom of the calculator, you'll see a list of cars that fall in your price range. This list is there to help you further explore the cars that interest you, knowing that you can afford any one of them.

Warning: Do not pay more than the Maximum True Market Value Price!

You can play around with the car affordability calculator by changing the inputs so you can see how they affect each other. This is a great way to learn about financing.

If you follow these guidelines, you'll not only end up with a car you can afford, but you’ll also be confident that you made a smart financial decision.

6 Choosing and Buying Your First Car

Payment Options

Cash: You can of course pay in cash but it is pretty rare for a college student to have 10,000 dollars sitting in their pocket, so another payment option is financing through a bank or dealership.

Financing: Financing through someone means you use their money, whether it be the banks or dealerships, to purchase the car. This option allows a student with little money to still be able to afford and have a nice, reliable car.

Contact a Loan Officer Once you know which payment option you can afford, you need to contact a loan officer at the bank to find out how much money they will allow you to have to purchase a car. Once you get a pre-approved car loan from your bank, you can use that to your advantage when you talk to different dealerships. You can tell dealers what the bank offered to loan you, and they will try to beat that loan because they want to be the ones you finance through.

It is good to check with your bank before you go car shopping because then you will already know your price range and the down payment you can afford.

When you begin looking for cars, you can look at private party sellers or dealerships. Whichever place, the dealership or bank, offers you the best deal and lowest interest rate is the route you should go.

Chapter 2 Dealership vs. Private Party Purchases

Chapter 2: Dealership vs. Private Party Purchases 9

Chapter 2: Dealership vs. Private Party Purchases

Whether you decide to buy your car from a car dealership or a private party, you still have to do a lot of research on car prices, and test drive and inspect your top choices.

There are several pros and cons of buying a used car from a dealership or a private party seller. If you're looking at similar vehicles at similar prices, the following tips will help you decide whether to go with a dealer or a private party.

Private Party Pros

• No pressured sales pitches.

• Private party vehicles cost less.

• More room for price negotiating.

Private Party Cons

• No warranties.

• No trade options.

• Multiple meetings with strangers.

• You must complete and submit most of the paperwork yourself.

Dealer Pros

• Dealers offer certified cars.

• Dealers provide warranties.

• Mechanic experts inspect the vehicles.

• Dealers must follow strict selling procedures, meaning you’re less likely to be cheated.

Dealer Cons

• Dealers have higher prices.

• Must deal with professional sales teams who rely on commission.

10 Choosing and Buying Your First Car

Find Used Cars for Sale Cars from a Dealership Once you have an idea of what car you want, you can see its availability by using the car buying tools on Edmunds.com.

First select the vehicle's make, model and year at the top of the Edmunds home page, and click on the results. If you don't find what you want, select a greater distance to search. You can also narrow your search to find cars in a specific color with different options to choose from.

Once you have found a car, contact the dealer to confirm the car's availability. To get the dealer's contact info, just click on the car photo, the car's name, or the dealer's name.

Cars from a Private Seller Before you start looking on the Internet, you should ask friends and relatives if they are selling any used cars. It is good to keep your eyes open for "For Sale" signs in car windows around your daily commute to prevent wasted time and frustration online.

Once you find a car you’re interested in, call the seller before you go to see the vehicle. This way, you can eliminate cars that have problems such as excessive mileage or a salvage title.

While talking to the seller, set up a time and place for a test drive. Try to make this appointment during the day so you can accurately determine its condition. Before you hang up, make sure you verify the asking price from the ad.

Tip: Ask the seller for the car’s VIN number so you can run a vehicle history report before you go look at the car.

Chapter 2: Dealership vs. Private Party Purchases 11

Test Drive Now that you've found a car that seems like it might be a good fit for you, call or e-mail the dealership's Internet department, or the individual that is selling their car to schedule a day and time for a test drive. By making a test drive appointment, you ensure that the car will be waiting for you when you arrive at the dealership and if you are buying from an individual, you ensure that you are serious in purchasing their car.

Drive the car the way you would in your everyday life.

• Drive in the city with stop and go traffic. • Drive on highways to check how it drives at a high speed and the cruise control. • Take tight corners and test the brakes. • Check the cargo space. • Sit in the front and back seats to ensure that you and your passengers will be comfortable.

Test drive all of your car options and pick the car that satisfies you the most. Although making the right decision is important, it is also important to realize that there isn’t one perfect car.

The cars today are a lot safer, get better gas mileage, and have better features than they did in the past. Though there could be several decent car choices, the final decision is all up to you and your individual taste.

You are now ready to move on to your car purchase with confidence.

Chapter 2: Dealership vs. Private Party Purchases 13

Chapter 3 Buy the Car

Chapter 3: Buy the Car 15

Chapter 3: Buy the Car

Buying a used car is a much cheaper decision than buying a new one. Besides the fact that you can get a car that's almost as good as new for a fraction of the price, you can also save a ton of money on insurance.

• If you are buying a car from a private seller you can finance through a bank.

• If you are buying a car from a dealership then you can choose where you want to finance.

Once again, whichever business can get you a better financing deal is whom you should finance through; meaning whom you should accept the loan from.

Now that you have a loan from a bank or dealership, all you have to do is meet with the dealer or private party, fill out the paperwork, and pay for the car. You are renting the car from the dealership or bank until you pay off your loan. Once you pay it off, you get the title and the car is yours.

Negotiate If your have followed the steps up to this point and done your research, your negotiating process will be successful.

Be careful if you are buying from a dealer, because dealers have a lot of experience with negotiating. Most private parties do not. Therefore, buying a used car from a dealer will be very different from buying from a private party.

Follow these guidelines when negotiating:

• Only negotiate with a salesperson or private-party seller that you are comfortable with.

• Make an opening offer that is low, but in the ballpark.

• Decide ahead of time how high you will go and leave when your limit is reached.

• Walking out is your strongest negotiating tool.

• Be patient. If negotiating in a dealership, you may be there for an hour, but less if you’re

negotiating with private parties.

• A high-pressure salesman called a "closer" might try to win back some of the gains you

made in negotiations. Hold to the price.

16 Choosing and Buying Your First Car

Once you have a deal, make sure the transaction is completed properly.

If you are at a dealership, you have to go through the finance and insurance process. If you are buying a car from a private party, you have to make sure that the payment is final and that the seller properly transfers the title and registration to you.

In both cases, you also need to make sure you have insurance on the car before you drive it away.

Once the contract is ready, review it thoroughly. Make sure you understand the charges and question any significant or unexpected additions to the contract.

Make sure the temporary registration has been put in the proper place and you're finally on your way.

When you buy a car from a private party, you might be asked to pay with a cashier's check or in cash. Before you exchange the money, ask the seller to sign the title over to you.

Once all of the paperwork is complete, it is finally time to relax and begin enjoying your new car.

Conclusion 17

Conclusion

There are many things to consider when choosing and buying a car, but once you relax and consider all of your options, you won’t feel as stressed and overwhelmed when closing the deal.

I hope that this guide has answered any questions you may have had about finding and purchasing the car that’s right for you. Now that you know a little more about the car buying process, I encourage you to use this manual as a resource when you decide to buy your very first car.

Warning: This manual does not cover every detail about buying a car, but covers only the important points.

Works Cited 19

Works Cited

"10 Steps to Buying a Used Car." Edmunds. Ed. Philip Reed. N.p., 17 July 2013. Web. 15 Apr.

2014.

"Negotiate Like a Pro." Auto Check Vehicle History Reports -. Experian, 2011. Web. 15 Apr.

2014.

"The Pros and Cons of Buying a Used Car from a Dealer and a Private Party at DMV.org: The

DMV Made Simple." DMV.org. N.p., n.d. Web. 15 Apr. 2014.

Index 21

Index

afford, 10, 11, 12, 13 affordable, v availability, 18 bank, 11, 12, 13, 23 budget, v, 10, 11 car, v, 9, 10, 11, 12, 13, 17, 18, 19, 20, 23,

24, 27 Car Affordability Calculator, 10 cargo, 9, 19 cash, 12, 24 Cash Down Payment, 11 cashier's check, 24 clean title, 9 commute, 9, 18 Conclusion, iii, 27 cons, v, 17 consider, 9, 27 contract, 24 deal, 13, 17, 23, 24, 27 dealers, 13, 23 dealership, v, 12, 13, 17, 19, 23, 24 dealerships, 12, 13 deciding, 9, 10 Desires, iii, 9 down payment, 13 Edmunds, 10, 18, 29 financing, v, 11, 12, 23 four wheel drive, 9 important, v, 9, 19, 27

Introduction, iii, v liens, 9 loan, 11, 13, 23 Loan Officer, iii, 13 Loan Term, 11 loans, 9 mileage, 18, 20 money, 10, 12, 13, 23, 24 monthly payments, 10, 11 Necessities, iii, 9 Negotiate, iii, 23, 29 negotiating process, 23 paperwork, 17, 23, 24 passengers, 9, 19 pre-approved car loan, 13 price range, 10, 12, 13 private party, v, 13, 17, 23, 24 pros, v, 17 purchasing, v, 19, 27 registration, 24 safety features, 9 salvaged title, 9 seller, v, 17, 18, 23, 24 sticker price, 12 Sticker Price Range, 12 test drive, v, 17, 18, 19 title, 9, 18, 23, 24 transaction, 24 True Market Value, 12