What first-time car buyers need to know

Think about the type of car you need – and keep the future in mind

“Really think about what type of car you need, and sometimes that may be different from what type of car you want,” Alex said. He recommends considering what you will need in the future, not just today.

“If someone's looking to grow their family in the next couple years, the two-door sports car may not make sense. It's very expensive to flip in and out of cars. So, when you're a first-time car buyer, you really want to get a car that's going to last you a few years, rather than one that you're going to go back to replace shortly.”

Consider the terms of the car loan

While some people might be able to purchase a car outright, many people need financing through an auto loan. These loans range from 12 to 72 months or more, but buyers should carefully consider the terms of the loan to ensure they get the best possible deal.

“Longer terms make the monthly payment easier to handle, but the downside is longer terms often have higher interest rates than lower terms. You will want to look at what works for your personal situation – a lower payment that comes with a longer term, or a more competitive interest rate with a shorter term,” Alex said.

Budget for other expenses besides your car payment

Just like buying a house, it’s more than just the car you are paying for — they come with additional expenses beyond the purchase itself.

“You've got to factor in insurance, annual registration fees, fuel and maintenance costs, too,” Alex says. “You really have to think about whether this makes sense long term and can I afford that payment today.”

He recommends creating a budget, determining estimated costs per month and year of each expense, and doing your research about insurance costs before overcommitting your budget.

Buying from a car dealer has its perks

One critical factor is deciding where to look for a car, especially with so many available options. You can buy outright from an independent seller, such as on Facebook Marketplace or a car buying website. You can go to a used or new car dealership and possibly consider leasing. Alex recommends car dealerships as the best option.

“The biggest benefit for going to the dealer is you've got that relationship for the future. If you've got maintenance issues or problems with the car, you've got a place to go,” Alex said. “Dealerships are also going to take care of the titling and the paperwork for you. If you buy from a third party, you're on your own to navigate that system with both the seller as well as the DMV or your Secretary of State for the actual titling work.”

Consider used versus new cars

Used cars that have been well maintained offer potential benefits in terms of savings. However, some used cars could have a higher risk of needing repairs or maintenance soon after purchasing.

“The biggest benefit of a new car is that new cars come with a warranty. There's probably a little bit more peace of mind up front that it's brand new. If there are any mechanical issues, you can easily take it to get fixed,” Alex said. “However, especially in the market we are in, there's not a lot of entry level new vehicles out there anymore for a first-time buyer. A lot of first-time buyers probably are looking at that used car market. You want to consider that the cheapest used car may have higher mileage and may require more maintenance costs in the future. Maybe a newer, more gently used car gives you that balance between less maintenance and a little bit higher price.”

Special considerations for parents purchasing their teen’s first car

Getting a driver's license is a special moment for many teens, and for some, it means parents and kids working together to help the teen with their first car purchase. But parents should keep a few things in mind.

“Parents should be aware that when they co-sign an auto loan, they're equally responsible for the vehicle. They will want to make sure that they have a conversation with who they’re co-signing with ahead of time to understand responsibilities and accountability for both parties,” Alex said.

In addition, parents might ask teens to split or pay for insurance and gas, as insurance for young drivers can be more costly than parents are used to for their own insurance costs.

As with any major decision, it might be beneficial to create a pro/con list tailored to your own specific opinions, considerations and details. After all, the last thing you want to compromise on is the safety and reliability of the car you will likely drive for a decade or more.