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Buying Your First Car

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Buying a car is exciting, potentially stressful, and often expensive. In fact, for many people, buying a car is the third most expensive type of transaction they have – after a house and an education. To make the process easier, consider that there are three parts of the process – choosing the car you want, negotiating the purchase, and paying for the car.

Choosing the car you want and can afford

Whether you decide to buy a new or a used car, be sure to do your homework. Along with considering the creature comforts of the car and whether you like it, you should also investigate the reliability of the car and the costs to drive it.

Be sure to take every car you are considering for a test drive. You can learn about the costs of operating the car and reliability by examining the gas mileage information on the sticker and visiting websites that review cars. Search online for sites that provide this type of information.

Also, speak with an insurance agent to learn what your insurance premiums will be.

When you take everything into account – car payments, maintenance, parking, gas and insurance – you may want to try to limit the total auto expense to 10% to 15% of your monthly income.

The new or used decision

This is usually a matter of your preference and what you can afford. New cars are nice and usually come with a warranty that covers unforeseen expenses, but they are more expensive.

If you are considering a used car, be sure to do some extra homework on the particular car you are considering. Have a qualified mechanic inspect the car and you may want to get a Vehicle History Report (websites like offer these reports) to learn more about the car’s history.

Negotiating the purchase

This can be the most stressful part. Do your homework and be prepared before you walk into an auto showroom. If you are just looking and not prepared to buy a car when you walk in, emphasize that to the sales person.

Stay focused on the purchase price of the car you want. Keep discussions about any trade-in separate and any discussion on financing out of the negotiation. Be sure to also research and think through different add-ons like rust-proofing, and extended warranties.

Paying for the car

While most people do not pay cash, you may want to do this if you have excess funds available. It is simple and you will avoid any interest expenses.

The most common option is to make a down payment and finance the rest. Auto loan terms vary, but your South State banker can help you determine the best for your situation. If you secure financing before you walk into the showroom, that will be one less thing to distract you and help you stay within your budget.

Another popular way people pay for cars is by leasing them. This avoids the need for a large down payment and at the end of the lease, you just return the car. But, you never own the car. Leasing may be attractive if you plan to only keep the car for three to four years or if you plan to drive a great deal and can get a lease without a mileage limit.

You can make getting the car you want easier by doing your homework. Whether you are getting a loan or using a lease, be sure to fully understand all the details before you sign any documents.


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