How To Buy Your First Car

Car saleswoman selling car
Peter Dezeley/ Iconica/ Getty Images

When you shop for a car you look at several different dealers, makes, and models. It is just as important to shop for a car loan. You can often find a better interest rate through your local bank or credit union than you would find with dealer financing. Additionally, if you are not financing through the dealer, you may have more negotiating power to lower the amount that your car costs.

Determine How Much You Can Afford 

The first thing you should do is determine how much you want to borrow.

This includes deciding what type of car you want, and the average price for the car. Additionally, you should determine how much you can afford. A good amount is what you can easily pay over a three year period. You should also look at your budget and determine the available amount that you have to pay. It is important to realize your budget because it can you avoid some of the mistakes people make when buying a car

Shop for a Loan Before You Shop for a Car

Next, you can begin looking for a loan. Many lenders will not guarantee a rate until you sign the papers, but they will give you preapproval for a loan amount and the current rate. You should begin by contacting your bank. If you are eligible for a credit union, you should check there as well. Be sure to ask about automatic payments and lower interest rates. Most banks will lower your payments if you set up an automatic draft.

Look for a Car

You will need to find a car.

You can look at dealers, but do not be afraid to look in the classifieds and other online sources. You can find some great deals through these sources. You should always have your car inspected by a mechanic you trust before purchasing it. A good mechanic can tell if the car has been in an accident or if there are any other major problems with the vehicle.

This is essential if you are buying from a private seller. If the seller seems reluctant to let you take the car to a mechanic, this should throw up warning signs for you. You should understand the differences between buying a new and used car

Finish Filling Out the Loan Information

Once you have picked out the car and negotiated the price, you will need to pay for your car. You can contact your bank with the final details. Generally, they will need the title or vehicle identification number to process the loan. Additionally, you will need to give them the title once you obtain it from the car’s previous owner.

Register Your Car and Transfer the Title

Once you own the car you will need to get a new title and tags (license plates) for your car. You can do this at your local DMV office. Most cities have a DMV for driver’s licenses and a different DMV for titles and tags. If you have a loan on the car, then the DMV will send the new title directly to the bank. The bank will give you a form to take to the DMV with the new title. A car dealer may help you with this as well. You will not be allowed to register your car until you have found and purchased car insurance. You will need to take the proof of insurance with you to the DMV.


  1. You should avoid buying a new car. You lose money the minute that you drive a new car home. A car is a depreciating asset, which means it decreases in value over time. The biggest amount of depreciation takes place in the first two or three years of a car’s life. By buying a two or three-year-old car you will avoid losing as much money.

  2. You can save money by selling your car yourself instead of trading it in. By selling directly to a person you will get more than you would from a dealer. Since you cut out the dealer, the buyer will pay less and you will both benefit from the situation. Dealers offer a higher initial price to cover the costs of the car that they are taking as a trade in.

  3. Do not become upside down on your car. This happens when you roll your previous balance from your trade in onto your new car loan. If you tried to sell it you could not pay off the loan with the sale of the car. Additionally, if your car was totaled or stolen, the check from the insurance would not pay off the amount of the loan.

  1. Next time you buy a car save up and pay for the car with cash. It will free up your income since you will no longer have a monthly payment. Additionally, you will be able to save money on interest. You will never have to worry about making a car payment again. You may be able to get by with joining a car share for a year or two to save up enough money to buy your own.