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How to buy your first car

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According to Experian the average monthly payment for a used vehicle last year was $465 while new was $609. As a first-time buyer, a number this steep can feel intimidating and even more overwhelming when you aren’t familiar with the process. But confidence is all about preparation, so take the time before heading online or to a dealership to understand the key steps to take when buying your first car. 

7 steps for buying your first car   

Follow these seven steps as a first-time car buyer to save money and drive away satisfied.   

Step 1. Determine how much you can afford 

The key to a successful buy is to first determine how much you can afford. This seemingly obvious step is determined by factoring in your credit score, monthly income and the type of car you want. The key is to strike a balance between fitting your budget and finding a car right for your needs.  

When budgeting it is important to look at the out-the-door price, not just the sticker price that you see advertised. The true out-the-door price is the entire cost that you will be expected to pay. Once you have that number — or a suitable estimate — factor in your typical salary and take advantage of a car loan calculator, which will help you determine what the monthly cost to finance the vehicle will be.  

Bankrate tip
Car ownership comes with unexpected costs so be sure you have room in your budget for any extra expenses.

Step 2. Save for a down payment 

The down payment for your future vehicle is the initial lump sum that you pay for it. It is smart to aim to cover at least 20% of the purchase price, which might take a while to save. Being patient and saving up for the down payment is likely worth your while if you can delay getting a car until you have the funds. It will save you money overall and lower your monthly costs.  

Step 3. Take a look at your credit history    

If this vehicle is your first large financial investment it is possible that you do not have a lengthy credit history. If this is the case, it is important to do a deep dive into your credit history to determine what loan options are available. Your credit score is the primary determinant of the interest rates that you will be offered. The better your credit, the more favorable your interest rate will be.  

Check your credit score before talking to a potential dealer. You can do so online through Experian or for free at It is worth waiting to get your credit in good shape before applying for vehicle financing if you can. 

Step 4. Decide what car is right for you    

Choosing which vehicle is best for you takes a lot more consideration than just color or style. Consider other factors, such as the vehicle’s durability, size for your needs, technology, safety features, gas mileage and the weather where you live.  

This is also a good time to determine if you want a new or used vehicle. While a new car is exciting, certified pre-owned can give you a lower price tag while still boasting new features. And if you aren’t in a bind to get behind the wheel as soon as possible you can save money by waiting for seasonal sales or deals 

Step 5. Prequalify for financing    

After you gather some information on the type of vehicle you wish to purchase and your financial history it is wise to apply for prequalification. This step is vital to saving money and putting you in control when it comes to choosing the best financing option available.  

Prequalification differs from loan approval, so even after the prequalification process ends it is not a done deal. Rather it will give you an idea of if the lender will give you approval and an estimation of rates. You will still have to fill out a formal application after, but you will have an idea if you can afford it ahead of time.  

You will likely need the following when you apply to prequalify:  

  • Average income. 
  • Personal information.  
  • Employment. 
  • Any current debt.  

Step 6. Head to the dealership — in person or online    

After prequalifying for a loan and setting your sights on your dream car, it is time to begin the car buying process. Before heading out to a dealer lot it is wise to look around online to see what vehicles are available in your area. You should also reach out to said dealers to set up appointments. That way you will get the attention you deserve. 

It is important to get behind the wheel of your potential car and take it for a test drive before you buy. Be sure to adjust the seat, measure if it fits in your garage and can handle your day-to-day routine.  

Step 7. Negotiate    

Negotiation can feel intimidating but getting the best deal comes down to standing up for yourself. Come prepared with any paperwork needed, a firm understanding of your credit history and the right questions to ask. But the bottom line is this: be prepared to walk away if you can’t get the deal you deserve. 

When the time has come to close the deal, remain steadfast on the agreed-upon number. You can expect the dealer to push for additional fees and add-ons. Say no to options like fabric or paint protection when an add-on like gap insurance might be more useful.  

Next steps  

Buying your first car is a very exciting process, but without proper planning it can cause headaches and possible overspending. Before you head to the dealership do your homework to ensure you drive off happy. And be sure to look at current rates so you understand what is available. 



Written by
Rebecca Betterton
Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.
Edited by
Auto loans editor