Things I Wish I Knew Before I Bought My First Car
One night on my way home from work, my husband (who at the time was just as financially illiterate as me) said we were going to the dealership to buy you a car.
My car was Pontiac Grand Am, a hand-me-down from my mother.
aI received it on my 21st birthday, lasting throughout college and the start of my career. The car was at least ten years old and constantly needing repairs.
I worried about breaking down on the highway and being stranded in a bad part of town. So my husband decided he had enough.
Buying my first car was my biggest financial learning lesson and the biggest regret of my life.
So we bought a car. It was THE BIGGEST FINANCIAL MISTAKE OF MY LIFE.
These are the things I wish I had known before I bought my first car. I hope these can help along your car-buying journey!
Shop Around Online Before Purchasing
We went straight to the dealership to look around for a new car. I knew what monthly payment I could afford but didn’t know what type of car I wanted.
At the time, I was also financially illiterate and knew very little about car buying. I was the car salesman’s dream come true.
After spending hours on the lot, I finally found a car I could drive home.
Was I in love with it?
No. But it got the job done.
It drove, was within my price range, and was safe. So I purchased a car with a monthly payment I knew I could afford.
So what is so wrong with that?
I later found that I had overpaid for the car because I didn’t do my research.
Furthermore, the car was worth less than I owed when I drove it off the lot until I paid it in full. I couldn’t sell the vehicle without spending money from my pocket.
You’re probably wondering how that is even possible. That leads us to the following *three* points.
Cars Depreciate Almost Immediately Upon Leaving the Lot
Yep, who would have known that the brand-spanking new car I bought depreciated as soon as I drove off the lot?
In fact, according to Dave Ramsey, a brand-new car depreciates 9-11% as soon as you drive it off the lot. That is a considerable chuck of change lost for driving a new car home.
Not All Dealerships Value Cars the Same
Cars are a product or goods, just like any other item.
Thus, allowing dealerships to mark the vehicle at whatever price they believe will sell—usually priced to gain the most profit. It’s all a part of running a business.
Since I didn’t research and bought a car from the first dealership I visited, it cost me thousands more than if I purchased the exact vehicle and model at another dealership.
Going online and using one of the many different car portals, such as cargurus.com, allows you to type in the year, make and model and compare different cars and dealerships online.
Comparing car prices online gives an idea of who sells the car you want in the area for the lowest price.
Not all Cars are Treated Equally
Some cars will depreciate quicker than others.
Doing research before purchasing a car will help determine if the vehicle you are interested in purchasing will lose value quickly.
This type of research is easy to do.
Just check used vehicles for the particular make and model you are interested in and view the price for older models.
Doing this will indicate if the car maintains value or quickly depreciates.
If you look at older models (even just a few years past) of the car you are interested in, and they are selling at rock-bottom prices, the car will likely lose its value quickly.
Gap Insurance is Real, and it will Cost You.
Gap Insurance is straightforward. When your car is worth less than what you owe, you will likely want Gap Insurance.
Gap Insurance protects the bank and the individual who owns the vehicle by making sure that the entire loan is covered.
For example, the car is valued at $5,000, while the car loan is $7,500. If you wrecked the car, some insurance companies would only cover $5,000 since that is the car’s worth.
However, the remaining balance on loan is $2,500. Therefore, Gap Insurance will cover the remainder of the loan, so you don’t have to.
Who wants to pay for a car they no longer have?
Therefore, the car’s owner doesn’t have to worry about paying the remainder of the $2,500, and the lender won’t be out of money if the person doesn’t pay.
Gap Insurance protects both the individual who has the loan and the bank.
Since I owed more than the car was worth the entire time I made payments, I had to pay gap insurance for the loan’s lifetime since my vehicle depreciated so quickly.
I wish I knew this as it costs me extra every month.
Paying Less Monthly on a Longer Loan Will Cost More in the Long Run
Remember when I said I went to the dealership with a monthly payment I had in mind of what I could afford?
Well, they adjusted the loan so that I could make that payment.
I didn’t know at the time (nor care because I was naive) that I was on a five-year rather than a four-year loan.
This means I paid more interest throughout the loan than a four-year car loan. Not so much of a win for me in the long run.
Before purchasing a car, use the Interest Calculator to determine how much extra you will pay for the loan depending on the interest rates and timeframe of a loan.
Check the MPG
Historically, gas fluctuates in cost. Rising and lowering, making it, at some points, painful if you drive a gas guzzler during times of rising gas prices.
Therefore, checking the miles per gallon for highways and city is essential.
The better the MPG, the easier it will be during high gas prices.
Cars are a Liability
I wish I knew that cars driven for personal use are a liability, not an asset. I treated my purchase like an asset, something I could later sell and get my money back.
Since I purchased the car new, it depreciated immediately upon driving it off the lot and continued to decrease at an insane rate.
Although I no longer owe on loan and the car is paid off, I can only get a little cash if I ever sell it since it did not maintain value.
I definitely will not get the money back from what I paid for it. Overall, it was a bad investment.
Sometimes this is untrue, especially if you make money from using your car.
However, the car is potentially a liability for those looking for a vehicle to get to and from work, run errands, and visit friends.
The car will depreciate and will not be a good return on investment.
Therefore, finding a vehicle that doesn’t depreciate quickly is essential as you can hopefully get more money back for your car when you decide to trade it in for a newer model.
Understanding Your Car's Worth
Kelly Blue Book gives a fair market value of the car is worth. It provides an idea of the vehicle’s fair trade-in value.
You can also take the car to several dealerships to get the vehicle appraised.
If you cannot find a dealership willing to give what your auto is worth, then selling the car yourself is always an option.
Buying a New Car is Not Always the Best Option
For my first car, I bought brand new, paid extra for gap insurance, got a longer loan that accrued more interest, and paid more in car insurance.
Several months later, when the new car high wore off, and the monthly payments kept coming, I began to look at my payment plan only to realize I was years away from paying off the car.
For me, four years and some months later felt like forever. I began to desire a lower monthly payment.
That is when I started car searching, going to a dealership to see what I could get out of my car.
Only to realize I was upside down on it. I owed more on that car than it was worth.
The only way I could get rid of the car was by giving money to the dealership, leaving me stuck with an unwanted vehicle.
How I learned from my Mistakes from Buying My First Car
Our second car purchase was different. I spent months searching for the perfect SUV.
I found one cheap due to minor hail damage (not noticeable unless you look for it). The used car was only a few years old.
The SUV was barely driven, in pristine condition (minus minor hail damage), and had no prior history of accidents. It was perfect.
The SUV I purchased the second time around maintained its value better than the Nissan, and I did not have to pay gap insurance.
The monthly car payment was cheaper, and I would spend less on interest as the loan was only four years instead of a five-year loan.
Therefore, I could pay off the car quicker and give the bank less interest.
The only downfall is the SUV’s MPG is not as great as our Nissan.
Overall I took the lessons learned from my first car purchase and used those towards my second purchase, which resulted in a more secure and satisfying car-buying experience.
The second car was financially a better choice.
Therefore, buying a brand-new car off the lot is only sometimes the best option. It is ideal for researching the vehicle you are interested in before purchasing it to ensure it is a good buy.
I hope this helps you avoid my mistakes when purchasing my first car. I would love to hear about your car-buying experience in the comments below.
In conclusion, buying a car can be a daunting experience, especially if it’s your first time.
It’s essential to do your research before making a purchase, as cars depreciate almost immediately after leaving the lot, and not all dealerships value cars the same.
Additionally, there are better options than buying a new car.
By learning from my mistakes, I made a more informed decision the second time around. I hope these tips will help you along your car-buying journey.
Full List of Things I Wish I Knew Before I Bought My First Car
- Cars Depreciate Almost Immediately Upon Leaving the Lot
- Not all Cars are Treated Equally
- Gap Insurance is Real and Cost You
- Checking the MPG
- Paying Less Monthly on a Longer Loan will Cost More in the Long Run
- Cars are a Liability not an Asset
- Understand What Your Car is Worth
- Buy New is Not Always the Best Option
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About Author, Sara Elizabeth
Writer, Amora V Lifestyle
Co-Owner of Elizabeth Besich Boutique
Sara is a writer for Amora V Lifestyle and is Co-Owner of Elizabeth Besich. Sara previously worked as a Marketing Manager and has her Master’s from Lindenwood University.
Sara studies everything of interest, from psychology, recipes, finances, mental health, and travel, thriving to find happiness and to live a good life.
When not learning, Sara loves all things outdoors, food, and hanging around great company. Furthermore, Sara loves spending time with family, who she is blessed to have in her life.
Note from the author: Through my articles, I hope to bring you joy and peace and that you enjoy it!
Disclaimer: The information provided in this financial article is for entertainment purposes only. It should not be construed as financial advice and does not constitute an offer or solicitation for investment. We cannot guarantee the accuracy or completeness of the information presented, and readers should always conduct their own research and seek professional advice before making any investment decisions. The content of this blog is the opinion of the author and should not be attributed to any organization or entity. Any reliance on the information provided in this blog is solely at your own risk. Any reviews or comments written are the subjective opinion of an Amora V Lifestyle member and not Amora V Lifestyle. Amora V Lifestyle performs occasional checks on commentary left by users. It’s worth mentioning that we may also use comments in our articles. By posting a comment, you are giving us permission to use it in our content. Please check out Privacy Policy and Terms of Use for full disclosure.
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