Skip navigation

<< Back to News

Money Management


How to Purchase Your First Car.

It’s an exciting time when you’re purchasing your first car. Seeing all the options can leave you dreaming about driving down the highway with the windows down singing to your favorite playlist in your new car. As you start the process, you may begin to realize that there’s a lot more to think about than you expected. That’s why we’ve broken down the process so you can feel prepared for every step. Let’s start with everything you need to do before you purchase a vehicle.

But, at some point you’ve probably asked yourself, “Am I heading in the right direction?” The best way to know is by creating a plan from the beginning. If you’ve already started your business without a plan, don’t be discouraged - writing a plan can happen any time you need to make some changes or seek funding. We can help you get started.

Before you Purchase

While you could go straight to a dealer to purchase a car, there are some things you should do beforehand to make sure the process goes well:

Calculate what you can afford

If you want to pay cash for your vehicle, then it’s really just about your ability to save and how much you’ve saved already. If you have time and you know what you want in a vehicle, you can sit down and see how much you are able to save and how much time you have to buy the car.

If you need a vehicle right away, and you don’t have cash saved up, then you’ll need to finance the purchase. This is how 85% of new car buyers make their purchase, according to fortunly.com¹.

A good rule of thumb is that you should spend no more than 10-15% of your monthly income on car and auto related expenses. If you have a good reason to spend more, you could spend less in other areas to justify it. Examples of this would be needing a bigger car because you have children, or a newer car because you travel a lot for work.

To find your price range, we have an auto loan calculator right here for you. Calculate a vehicle payment >

Keep in mind that monthly payments aren't the only expense you will have. There are other costs associated with purchasing and owning a vehicle that will vary depending on the overall price, how new the vehicle is, and where you live. These costs include:

  • Insurance
  • Vehicle title application
  • Sales Tax
  • Property Tax
  • Registration Fees
  • Gas
  • Repairs

Research vehicles in your price range

Once you have established your price range, it’s best to find information about the vehicle or vehicles you need. There are a variety of trusted websites that review vehicles such as Edmunds and Kelley Blue Book. Spend time on one or more of these websites to gain insight on what cars fit your needs the best, which ones are the best rated, and what year or trim level fits your budget.

Get pre-approved for a car loan

If you’re financing the purchase, you could still walk onto the lot with the advantages of a cash buyer by getting pre-approved. A pre-approval is a bank or credit union saying they will lend you up to a certain amount at a specified rate for a vehicle that meets their requirements. While the rate is still not fully guaranteed, you typically get the rate you were pre-approved for as long as the vehicle meets the requirements.

The advantage is that you know how much you’ll be paying monthly and you can even negotiate the price (more on that later). You can even get a pre-approval from an online lender or finance company. Often times the best option is to go with a local bank, like Southern Bank. This is where you can get competitive rates and a local lender who will give you good service and work with you to get what you need.

This is not to be confused with getting pre-qualified. A pre-qualification only considers a soft pull on your credit score and estimates what you could qualify for. Nothing is guaranteed and rates and payments could change when you go to take out the loan. A pre-approval takes into consideration your full credit score as well as other factors to tell you what rate you’ll get and how much you can spend on a car.

Note that since it will put a hard pull on your credit, it’s best not to get a pre-approval until you are serious about purchasing a car.

Get competitive auto loan rates with Southern Bank
Get competitive auto loan rates with Southern Bank

Set up insurance for the car you want

In order to drive the car off the lot, you will need auto insurance. This is to protect you and someone else if you were to get into an accident after leaving the dealer. You can easily get set up with an insurance provider by giving them all the information you have, including the type of car you plan on purchasing. Once you have the full information, you can call the insurance company from the auto dealer to have them add it to your plan. Once they have all this, you can leave the lot knowing you are protected.

Protect your new vehicle with Southern Insurance.

Purchasing a Car

Now that you’ve prepared for the purchase, it’s time to find a dealer and buy your first car. This is an exciting part of the process. As you go through it, make sure you remember all the research you did beforehand to ensure you make the right decision at the dealer.

Find the right dealer or private seller

Keep in mind that the first part of shopping could happen online, as you look at different dealers or private parties that sell the car you’re looking for. Questions you should answer when looking for a dealer include:

  • Do they have the car I need?
    Don’t always assume that because they are a dealer for the make you are looking for, that they have the model you need. It’s best to check online or call before going.
  • Do they have the right price?
    Be sure to compare the price of one dealer or private seller to at least one other dealer or seller, you never know what other deals might be out there.
  • Does this dealer have good reviews?
    Even if a dealer has a really good deal on a vehicle, online reviews could reveal some reasons to avoid going with them. This is especially true if you are looking at used vehicles, since they could be hiding information about the kind of shape the car is in. If you are purchasing from a private party, make sure they are valid. If they have sold other items online, look at reviews of the seller. It’s also a good idea to make sure the website you found them on is legitimate.
  • How close are they to where I live?
    Purchasing a car closer to home could have some benefits. If you need work done or there are recalls on the vehicle, you won’t have to travel as far to get to the dealer. However, if you find a much better price for a comparable vehicle at a dealer farther away, it could be worth the travel if you are able to get there.

Test drive the vehicle

You should never purchase a vehicle without driving it. This assures you that the vehicle actually runs, and that you enjoy the driving experience.

Have at least two options to look at

If you test drive the car you’ve only seen online, and decide you don’t actually enjoy the vehicle, you could feel stuck if you don’t have other options to look at. This is why it’s best to have at least two options. In reality, they probably won’t both be available at the same dealer. If they are, you can easily mention that you’d like to look at your other option instead. If not, simply thank the salesman, express that you aren’t interested at the moment, and head to the other dealer for your next best option.

Negotiate the price

This is the point where being pre-approved makes a big difference. If you don’t have pre-approval or cash, then the dealer will likely ask you what you can afford per month. If the dealer is responsible for getting you to that monthly price, then you won’t have as much room to negotiate the overall price of the car.

When negotiating, there are a few tactics that will help you:

  • Know the market value
    You won’t end up with a good deal if you don’t know what it’s worth. Make sure when you’re doing research, you really understand how much the car you are looking for is worth.
  • Don’t make the first offer
    Once your offer is made, you’ve revealed where you are on the price. If you want an even better deal, it’s best to get an idea of what the salesperson is willing to do. You could prompt them to give you a number by saying something like, “I’ve seen what other dealers are offering, what kind of deals do you have on this one?”
  • Make a counter-offer
    This could happen multiple ways, but if you get a number that the salesman is asking for, it’s best to then respond with a number closer to what you’d like.
  • Be willing to walk away
    If the number they are asking is too high, be willing to walk away from the deal based on the knowledge you have. As you go, you might even get a better offer from them.

Keep in mind that once you have the deal you want, the actual signing of the contract will happen later in the Finance office. They will offer you other add ons like an extended car warranty that will affect your overall price. We recommend doing research to see if these are beneficial for you. Some people choose to purchase these add-ons through the dealer while others choose to get them later through another party.

After purchasing your vehicle

Once you’ve purchased the vehicle, there are just a few more things to remember.

Call the insurance agency

This is a reminder that once you purchase the car, you need to call your insurance company to add the exact vehicle to your policy while you are still at the dealer.

Register your vehicle and Pay Sales Tax

Registering your vehicle and paying sales tax both take place at the Department of Motor Vehicles (DMV) for your state. States have different regulations for when you have to register your new vehicle so you will need to check with your state to find the time frame for when this needs to be done.

Learn more about Southern Bank Auto Loans here.

Disclosures & References:

1 Mitic, I., “Car Loan Statistics That Will Make You Want A Bicycle”,, Oct. 13, 2021,