Millennium Money: Don’t let your first car be a $ 30,000 bug

Set spending limits before stopping at a car dealership; with proper preparation you will be able to avoid making your purchase a burden.

Buying your first car is a scary experience; in the midst of a historical supply shortage it is easy to feel overwhelmed.

In March this year, the average price of a used car was $ 27,246, according to Cox Automotive, a company that deals with the car market and data – or 28% higher than a year ago. With this rise in prices and increased monthly payments. According to Experian, average payouts for used cars reached $ 488 in the last quarter of 2021. In addition, the average loan term for used cars was just over 67 months, or more than five years.

For many machines are a necessity. If you have little or no credit, no co-signer or just a limited budget, you can easily take a loan that will boost your budget or tie you to a car for six, even seven years.

If you are not ready before going out to the car park, it may open the door for a purchase that you will later regret. Set your limits before you ever stop at a dealership; with proper preparation you will be able to avoid making your purchase a burden.


Your first step is to calculate what loan payments you can afford and the total amount of the loan that is included in your budget.

Make sure that the monthly payment on the loan does not exceed 10% of salary, and if you buy a used car, keep the loan term less than 36 months. If you are looking for a new car, keep the period less than 60 months. Limiting the term of the loan will save money on interest and reduce the risk that the loan will turn upside down – the debt is more than the car costs.

Figures in hand, start looking for a lender who will give you a loan. Obtaining a pre-approval loan before visiting dealer lots can give you a better negotiating position, will not allow you to exceed your budget and reduce the amount you pay as interest.

With or without a small credit history – especially since you didn’t have a car loan before – it’s best to get a loan at the lowest possible interest rate – apply with a co-signer. But if that’s not possible for you, there are still alternatives to funding:

– One of the first places to pay attention is banks and credit unions, especially institutions with which you have established relations.

– Look for lenders in your area with first-time programs that set the terms for the amount you can borrow and vehicles that you can buy but do with some credit requirements.

– You can also look for loans from online loans that offer car loans with bad loans, as they often have a low or no minimum credit score. These loans can have interest rates over 25%, so a year after taking one, you can try to refinance at lower rates.


It used to be easy to find a cheap car – or at least easier than it is now. If you have a budget of $ 10,000, your options are limited, but that doesn’t mean there are no options.

With a limited budget, most of the choices will be old used cars, and this increases the annual cost of maintaining your car. A Consumer Reports study for 2021 found that car maintenance of the 2016 release for the previous 12 months cost $ 205, while 2011 release vehicles cost $ 430.

In addition to maintenance costs, there are also fuel, insurance, registration and taxes that add to the cost of owning a vehicle. If you are looking for a car, pay attention to the cost of ownership, as it will vary from car to car.

The total cost of owning your car, including the loan payment, should not exceed 20% of your salary. While some costs cannot be significantly reduced, you can minimize others – such as future maintenance, repairs and fuel – with the right car.

“The most important thing to look for is a car with a good history of maintenance,” said Joey Caparello, senior editor of Car and Driver, in an email. “If the previous owner took good care of the car and can give service receipts, it prevails over other attributes such as the number of miles or the brand. For the same reason, cars of one owner are desirable.

The history of service and ownership can sometimes be found through a service like Carfax. Use this information as well as the overall mileage and age of the car to narrow down your search. If you look at vehicles for less than $ 10,000, a car with fewer miles will often be a better choice if all else fails.

Once you’ve stopped in the car, do it for a long test drive, Caparello added, and pay attention to “seating position, visibility from windows and engine sound”.

If something in the car doesn’t suit you, another car will be best, and don’t be afraid to be picky. You may not be buying the car of your dreams, but you can live with your choice – and pay for it – for years to come.


This column was provided by The Associated Press on the NerdWallet personal finance website. Colin Beresford is a writer at NerdWallet. Email: Twitter: @Colin_beresford.


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