This was originally published on Monday, September 19 ,2016 in the Pacific Daily News. Click here to subscribe to the PDN.
Q: I am about to buy my first car. My credit score is good and I have money to make a down payment. Do you have any tips for a first-time buyer?
A: Buying your first car is a huge event and a moment you will never forget. It can be quite daunting with all the choices that are out in the market. Although you are eager to purchase a car, take some time to really make a sound decision and get the best deal.
- Research. There are many choices in the market. Decide what is going to fit your lifestyle. If you are single, do you need a seven-passenger vehicle? Look for vehicles that are in your price range. There are many websites that you can go to research the type of vehicle you want. Find out how happy people are with past models. Does the company have a good safety record? Visit several different dealerships and test drive a few cars that you are interested in. Don’t be afraid to ask questions.
- Prefinance. You can obtain financing from the car dealership but the interest rates are generally higher than most financial institutions. Start with your financial institution and see how much they are willing to lend you. It is best to find out what they think you can afford versus finding a vehicle you really want and not being able to be approved for the amount to purchase it.
- Negotiate. Don’t be afraid to put a number out there. You may start off lower than what you want to pay and work your way up. Sometimes you can get a few extra amenities added for the same price. Purchasing a car is an investment you will be paying off for the next few years. The less you have to pay, the better. Negotiate on the base price of the car and not monthly payments. Review exactly what is being offered in the price. If you don’t need heated seats, don’t pay for them. Know the full purchase price which may include processing fees, taxes, delivery fee and registration, just to name a few.
- New or used. While you are at the dealership looking at new cars, take a look at some of the used vehicles. Ask the salesperson to see some of the cars they used for the showroom and test drive last year’s models. These gently used vehicles have low mileage and are still in excellent condition.
- Insurance. Don’t forget to factor that you will have to pay insurance on your new vehicle. Go to your insurance company and ask them for a quote on the vehicle you have chosen. Add that into your purchase price and monthly payments. Don’t forget to ask if they have bundled packages with your other insurance. You may be able to get a discount.
- Extended warranty. Generally, new cars come with a manufacturer’s warranty for a certain amount of time or miles. Dealerships offer an extended warranty. These warranties can be costly. Be sure to read through what is exactly covered in the extended warranty. If you do choose to purchase it, do not use your loan to pay for it. You do not want to be paying interest on your warranty. Start putting money aside to help with maintenance and repair costs.
- Maintenance costs and fuel efficiency. Estimate the maintenance costs, such as oil changes, and also factor in an estimate for fuel costs. These are things people tend to forget when they are looking for their first car.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at email@example.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.