(MoneyWatch) You've been borrowing cars from your friends or parents and renting occasionally but now you think you can afford a new car of your own. First-time buyers face some special pitfalls. So make sure that in the excitement of new-car shopping you don't wind up with the wrong car -- or worse, one you can't afford.
Your inexperience could make you prey to bad choices or an aggressive car salesman. But fortunately, you can mount a good defense: Careful research. "The more research you can do before you ever go into a dealership, the better deal you are likely to get," says Philip Reed, senior consumer advice editor of the automotive web site Edmunds.com. That research starts with making sure you are picking the right car. (In part 2, later this wee, we will focus on getting the best deal).
Normally, a first-time buyer would consider less-expensive used cars. But used car prices have risen so sharply in the past two years that for now, a new car is often a better deal once all costs, including depreciation, are considered.
What do you really need?
From those seductive TV ads and word of mouth from friends and co-workers, you probably have a few ideas about what car you would like to buy. And it is good to pick a model you can be excited about. But check to make sure that car will really fit how you usually will drive it. Consider these issues:
- Will you often carry passengers? If you like to drive around with your friends or might take road trips, back-seat passenger space can be an issue. Svelte and sporty cars like Ford Mustang or Chevrolet Camaro can be a lot of fun. But those back seats can feel cramped before long. Look instead for something like the Volkswagen GTI, which also has sporty performance but decent and comfortable rear seat room.
- Will you need to haul stuff? If instead of passengers, you plan to haul camping gear, fold-up bikes or lots of sports gear, you may need different choices. If you can afford it, you might consider a Subaru wagon or a small SUV such as the Honda CR-V. But some smaller, less expensive cars like the Honda Fit have commodious cargo space with all rear seats folded down.
- Will you use the car to commute? If you have a sizable daily commute, gas mileage becomes especially important. If a lot of that drive is on slow city or suburban streets, you might consider a gas-electric hybrid like the Toyota Prius, which get especially good mileage in such conditions. If a large part of your drive is at highway speeds, consider models rated at or near 40 MPG in highway driving such as the Hyundai Elantra, Ford Focus or Chevrolet Cruze.
In addition to my suggestions here, it is easy to find likely alternatives to a given car. One click on sites such as Edmunds.com or Kelley Blue Book (kbb.com) will show you competitive cars in a given class.
What can you afford?
Nothing can make you unhappier with the car you chose than finding that paying for it is wrecking your budget. You also need to do careful research not just to get the best deal but to look at these other considerations:
- Do you have an adequate down payment? A car is a depreciating asset. And putting down at least 10 percent of the purchase price will put you in a better position to minimize the time that you will owe more on the car than it is worth as a used car. That becomes important if you want to trade it in later or in the unhappy event that it is declared a total loss by the insurance company after an accident.
- Are you considering all your costs? A site like the BankRate.com auto loan calculator shows you current interest rates and lets you calculate monthly payments. In addition to monthly payments, you will have to pay for insurance, maintenance and, of course, gas. The Kelly Blue Book Total Cost to Own section will show you the best values in each class and lets you calculate the number for a specific car.
- Should you consider leasing? Recent promotional lease deals offer very attractive low payments. But leasing is not for everyone. You only have the car for the lease period, typically three years, with possible penalty fees when you return it if the car is not in near-perfect shape. And you still have to pay insurance and all other costs that you would if you bought the car.
In looking at affordability, first-time buyers now have much better choices than they did just a few years ago. Several recently-introduced compact and subcompact models starting under $20,000 have comfortable interiors, up-to-date technology and many other options that until a few years ago would have been available only on much more expensive models.
Take a test drive
Once you have narrowed your choice down to two or three models, you need to take a test drive. No matter how perfect a car appears to be for you, you won't know for sure until you have driven it. Call a local dealer and make a test drive appointment. Make it clear that you are only test driving, not negotiating to buy. And once you have driven the car, be adamant that you still have other cars to drive and have no interest in buying that day.
When you take the test drive, make sure you approximate your likely driving conditions, advises Philip Reed of Edmunds.com. Try the car in stop-and-go driving and at highway speeds. Drive over bumpy patches. If you drive in hilly terrain often, try to find some steep roads to climb. Get in and out of the car and sit in the back seat to see how it works for passengers. Make sure you find the driver's seat comfortable and like your lines of vision.
Once you have test-driven enough models to make your choice, you can focus on getting it at the best price.
Later this week: How to get the best deal