Ready to get your own set of wheels? Laura covers ten things first-time car owners need to know. You'll learn the pros and cons of buying versus leasing, how to get the best deal possible, and ways to pay for your new ride.

21 minute read

Hello friends. And thanks for joining me this week. My name is Laura Adams and I’m a personal finance and small business expert and author. Who’s been hosting the money girl podcast since 2008. My mission is to help you get the knowledge and motivation to prior prioritize your finances, build wealth, and have more security and less stress. I create every show to make sure you come away with some practical advice and tips that will help you make better money decisions and take your financial life to the next level. If you are thinking about buying or leasing first car, or even your 10th car, you may not know exactly where to start or how to get the best deal. So I hope you’ll stick with me. If you’re interested in learning more about ways to wisely buy or lease a car while you might think that you should just head straight for the day, that is typically not the best move.

So in this podcast, we’re gonna cover 10 things that first time car owners need to know about the pros and cons of buying versus leasing, how to get the best deal possible and ways to pay for your new ride. Be sure to subscribe to the show and participate by sending me your money, questions, or comments. You can leave a message. 24 7 on our voicemail line at 3 0 2 3 6 4 0 3 0 8. You can email me using my [email protected] or connect with me on Instagram at Laura D. Adams. And if you wanna read a companion blog post for this or any show, they’re always published in the money girl [email protected] Today’s episode is number 698 called 10 things. First time car buyers should know. You’ve probably seen that the car market has been a little weird since the pandemic, the supply of vehicles has gone down due to the closures of manufacturers around the globe.

And there’s also been a shortage of micro chips that go into new cars. So that’s been a huge disruption to the supply chain. The shortage of new cars has caused the used car market to skyrocket. I typically only buy pre-owned luxury cars, but get this. I found a better deal on a brand new Acura, and that’s really unusual as the prices for used cars are going up. It makes the cost of a brand new vehicle, a lot more competitive, a especially if you can get some incentives on purchasing a new vehicle while automakers and dealerships are evolving to offer more ways to buy cars entirely online, you know, I tend to still wanna touch and test drive them before making a decision. So, you know, I think going into a dealership is something that you may not be able to avoid. Uh, just depending on your style.

It could be something that you just do to kind of get an education and to get that touch and feel of the vehicle and then buy online. So it it’s gonna be a little different on, on what makes you feel comfortable. Anyway, let’s get into the details on each car buying or leasing tip. You should know. Number one, never go car shopping until you know what you can afford. This is so critical because you, you truly just need to decide what’s gonna fit into your budget. A good role of thumb is to keep your car payment at no more than 10% of your net pay. So if your take home pay is 3,800 a month, your car payment shouldn’t exceed $380. You can get help crunching the numbers by using a car loan payment calculator. There’s a [email protected] You might also [email protected] You can input different terms and loan amounts and see how it affects your payment.

But remember that you’ll also have other expenses to cover like fuel or power. If you got an electric vehicle insurance and maintenance not covered by a warranty, number two credit plays a significant role in your monthly payment. Once you’ve got a price range in mind for your vehicle, you wanna check your credit. Auto lenders rely pretty heavily on credit. When setting your loans interest rate offer the better your credit, the lower your interest rate will be. Now, if you have no credit or poor or credit, you may get turned down for an auto loan or get quoted a relatively high interest rate with a higher interest rate. That means you’re gonna have higher monthly payments. And that means you may need to buy or lease a less expensive vehicle or save up enough cash to avoid having to take out a loan altogether. And if you’ve excellent credit, you’re gonna qualify for very competitive interest rates and get lower monthly payments.

So that could mean you can afford a more expensive car. So I would say if your credit is not in good shape right now, it’s worth waiting to get a car loan or a lease until you can build your credit up or rebuild it and qualify for terms. Number three, car reviews are critical to consider while you might be dreaming about buying or leasing the best looking car. I want you to be sure to browse reviews on popular automotive websites, vehicles have very different ratings based on features like their safety, reliability, resale value, gas, mileage, recalls, and handling, make sure a potential vehicle will fit all your priorities. Like, you know, needing enough room for the entire family, being comfortable on long trips or compact enough for city driving in general, the longer you can keep a car the better. So be as mindful of your current and future driving needs as possible.

So you don’t have to go through this process again and, and buy another car within a year or so. Compare features and prices of different makes and models that interest you and then build S drive less. If you’re considering a used vehicle, look up the value using online sites like Kelly blue book and Edmunds number four, research car loans to find the best offer. If you wanna get the best rate on a car loan, you’ve got to do your homework. You wanna start this before you go into dealership or start your shopping process. While you can apply for dealership financing, I would recommend that you check with your bank or your credit union first to see what APR you can get, because it may be a whole lot more competitive than what the dealer’s offering. Also shopping compare car loan, interest rates, using online to save the most money on finance charges, shop for the shortest loan term that you can afford.

That’s gonna reduce the amount of time you have to pay interest, although the shorter, the term, that means your monthly payments may go up. So again, you’ve really gotta balance the term with the monthly pay. And as I mentioned, if your credit is you may be able to get a car loan, but at a higher cost, you may find that credit unions are more lenient than traditional banks and will offer more competitive loans. Even if you’ve got poor credit. However, you typically need to be a member of a credit union first in order to use their services credit union membership requirements V depending on the institution. And sometimes they can be as simple as making a one time donation to a charity supported by the credit union. You can visit a site like find a better bank to find a local or national credit union near you.

And once you’re ready to buy a car, I recommend that you get pre-approval for the loan, gotta submit your personal information, like your social security number and your salary information. So the lender can review your credit in financial history. If you get pre-approved, you are going to know the exact maximum amount that you could borrow and what your interest rate would be. That’s gonna be super helpful as you go shopping for a car. And it, if, if you’re worried that shopping around and getting multiple hard inquiries from lenders is going to hurt your credit. Don’t be, if those inquiries with different auto lenders occur within a short period, such as two to three weeks, they actually get treated as if you were just making one inquiry. In other words, the credit bureaus are, are pretty smart and they don’t penalize your credit. When you’re shopping around and comparing rates for a new credit account.

Number five, always avoid getting upside down on a car loan within the first year of ownership, the average new car depreciates about 20%. If you take out a loan and end up owing more than a car is worth, that’s called being upside down. Consequently, if you decide to sell the car before paying it off, you’re gonna have to make up any difference between the sales and you’re remaining loan balance out of your own pocket. So no one wants to be upside down on a car loan and owe more than it’s worth to avoid getting upside down. There are some strategies that you can use. One is to pay a larger auto loan down payment, such as 20% or even more. If you can, for instance, if a car cost $40,000, try to put down 20% or $8,000, in addition to giving you more vehicle equity right off the bat that reduces your monthly payments, and it may allow you to shorten the loan repayment period.

Also consider buying a vehicle that holds its value. So it’s worth more if you decide to sell it. And if you can pay cash for a car, I mean, that’s great. You’ll avoid owing years of interest payments on an auto loan that could certainly save you thousands of dollars, depending on your loan amount and rate today’s episode is supported by policy genius. Policy genius. Can’t help you refresh your cool weather wardrobe for fall, but they can help you shop for another kind of coverage. Life insurance policy genius makes it easy to compare quotes from over a dozen top insurers. All in one place, you could save 50% or more on life insurance by comparing quotes with policy genius, you could save $1,300 or more per year life insurance by using policy genius to compare policies, just go to policy genius.com. When you’re ready to apply the policy genius team will handle the paperwork and scheduling for free that’s right? No extra fees and eligible applicants can get covered. And as little as a week, thanks to an award-winning policy option that the standard medical exam requirement for a simple phone call, this exclusive policy was recently rated. Number one by Forbes advisor, head to policy genius.com to get started right now, policy genius. When it comes to insurance, it’s nice to get it right.

Number six, understand the difference between buying and leasing a car. When you lease a car, you sign a contract that allows you to drive it for a period such as three or four years. It’s less common than buying a car, but it has become more popular with the rising cost of vehicles with leasing. You never build equity, so you don’t need need to make a large down payment like you should with a car loan, any down payment that you make should be the minimum amount, which could be 10%. For instance, say you lease a $45,000 vehicle that will be worth $20,000 in three years when your lease expires, the difference is the depreciation or $25,000. So when you take that depreciation amount, you subtract out any down payment that you make. That number is used to calculate your monthly lease payments. So instead of paying a retail price for a car, when you lease, you only pay for the estimated depreciation of the car during the lease period.

That’s why it costs less to lease a vehicle per month than to buy it other than depreciation and any down payment that you make. Some other factors that determine the monthly payment on a lease include the term of the lease. You know how many years you’re, you’re leasing the vehicle, the vehicle’s retail price, your credit, any dealer fees and state local taxes on the lease, just like with a car loan, the better your credit, the better your lease terms will be. If you’ve got poor credit, you may have to pay a larger down payment and larger monthly lease payments since not all cars depreciate equally. It’s always a good idea to lease a vehicle that holds its value Edmonds and true car are some really good resources for researching vehicle prices and depreciation rates. At the end of your lease contract, you can return the car to the dealership or opt purchase it for its depreciated value, which is also known as its residual value.

So let’s review some of the benefits of leasing a vehicle. Like I mentioned, it’s typically more affordable than buying the same car. Major repairs are covered by the dealer unless your lease exceeds the so for instance, if you’ve got a three year warranty on a vehicle and you lease it for four years, you would be responsible for repairs on the car. In the fourth year, you get to drive a new car with the latest safety features. Every few years, you can avoid the hassle of trading in or selling a vehicle when you do a lease. But there are definitely some downsides to leasing. One that I mentioned is you don’t build any equity in the car. You’ve gotta pay for damages or excess wear and tear. After the lease is over. You’ve also gotta pay for mileage overages, such as if you drive more than what is allowed in your lease, which typically 10,000 to 12,000 miles per year.

So if you know, you’re gonna drive more than that mileage, you will probably have some overs to pay and breaking a lease comes with some pretty hefty fees. If you end up having to do that for some reason, while leasing a car can be a wise move, depending on your is your goals and your lifestyle. Let’s talk about the benefits of buying a car. When you own a vehicle, you get to customize it, you get to trade it in for another vehicle. You get to sell it outright for cash. You get to drive it as much as you like. And if you pay off your loan, you get to continue to drive that vehicle for free, ultimately, but there’s certainly downsides of owning a vehicle as well. You know, you’ve gotta make a down payment. In most cases, you are gonna have higher monthly payments compared to leasing the same vehicle.

You could get upside down on the loan and owe more than it’s worth. And you’re always responsible for repair costs. After any warranty expires. Number seven, buying a used car requires due diligence. You may sign that you don’t wanna buy a brand new car, getting a used vehicle. That’s already DePree can be a good way to save money. Many dealers offer certified pre-owned or CPO vehicles they’ve been thoroughly inspected, typically have low miles and they carry an extended manufacturer warranty. As I mentioned, that’s typically the way that I have always purchased cars. If you buy a used vehicle from a dealer, they may provide a free car history report for you. However, if you buy a car from an individual, you wanna be sure to purchase a vehicle history report using a site like Carfax or auto check look for any discrepancies and what a dealer or a private party reports about a vehicle.

And if you see anything that don’t match up, you wanna consider that a red flag and probably stay away from the deal. Also always have a car sold by an individual inspected by an outside mechanic before buying it. It might cost you a few hundred dollars, but is definitely worthwhile. Especially if the mechanic uncovers a potentially costly issue, number eight, expect to negotiate your car purchase or lease. Whether you decide to lease or purchase your vehicle, you should expect to negotiate the deal. Remember that just because you got pre-approved for a specific loan amount, doesn’t mean that you should spend the maximum amount, use these tips to get the best deal on a purchase possible. You wanna focus on the price of the car, not the payment. If the car salesperson asks you what you want your monthly payment to be, you need to know that that is a tactic that they use to get you to buy a more expensive vehicle.

They ask you that, tell them that you only want to discuss the car’s purchase price. You’re not gonna talk about the monthly payment because it’s irrelevant. You also wanna bring information about the best purchase price that you found for the vehicle. With you show the salesperson, your research and say, Hey, if you can beat this price, I’m ready to make a deal today. You also need to know the trade in value of, of your vehicle. If you’ve got a car to trade in for a purchase, make sure you’ve got a reasonable price in mind. So a dealer can’t offer you too little for it. Okay? Now, if you’re going for an auto lease, here are some tips to consider. Just like with buying a car, you wanna focus on the total cost of the lease, not the monthly payment. The total amount of a lease is known as the gross capitalized cost.

Again, the salesperson may ask you what payment you would like, but just like with buying a car, the entire cost is what matters with a lease you wanna ask for a higher mileage allowance. Remember that if you exceed a leases mileage, you’re going to have to pay overage fees. And that could really add up. So try to negotiate extra miles for free. So for instance, if the dealer is saying, you’re gonna get 10,000 miles, know that you may have a little wiggle room there ask for 12,000 miles or 13,000 miles. If you know you’re gonna drive more than 10, you might request a lower interest rate. This is true, especially if you’ve got good credit, don’t be afraid to push for a lower interest rate to save money. If you’ve got good credit and ask to waive future lease fees, dealer charges, what’s called a disposition fee.

When you return a car at the end of the lease, you might ask them to wave it in order to sweeten the deal. And lastly, discuss the buyout price. If you’re considering buying a vehicle at the end of a lease, let the salesperson know it’s possible to negotiate a lower price. Then the anticipated market value of the car at the end of the lease, all right, moving on to number nine, understand what it means to co-sign a car loan or lease. If you can’t get approved for a car loan or lease on your own, consider asking a family member or friend with good credit to co and for you, but be aware that the loan or lease payment history gets reported on both of your credit reports. So in other words, making payments on time will benefit both of your credit scores. But if you fail to make payments on time, it’s going to damage both of your credit scores.

And if you default on a loan owner, lease, the lender will hold both of you both. Co-signers equally responsible for the entire debt. This is true, even if the co-signer never drove the car. So co-signing is a pretty serious financial move that no one should take lightly. And lastly, number 10, shop for auto insurance, as soon as possible. If you already have car insurance, either as a non-owner or because you’ve already got a car update the coverage, as soon as possible after buying or leasing a car, most policies include a grace period, such as 30 days when any new used or leased car is covered automatically. But you do need to update the coverage within that grace period, since your vehicle make and model affect your auto insurance premium, that means your rate could either go up or down when you update it with the new information, but it’s critical that you do it before the grace period expires.

However, if you’re buying or leasing your first car and you don’t have insurance, you need to purchase auto insurance before you drive your new car home. Since you don’t have any retroactive grace period to fall back on driving without insurance could put you at serious financial risk. So never do that. If you buy or lease a car from a dealership, make sure you’ve got insurance in place before you leave a car dealership with a purchase or a lease. And another type of insurance you might wanna get familiar with is called guaranteed asset protection or gap coverage. It, if you buy or lease a car from a dealership, they may offer it for you. This type of protection actually pays the difference between the amount you owe on your loan or your lease and the value, the insurance company, places on your car. In other words, it protects you from the financial risk of getting upside down on a vehicle.

And with most leases, they actually require gap coverage. All right, once you’ve reached a deal, sign the paperwork and have all your insurance. You are ready to take the keys and enjoy your new car. I hope these tips will help you get an amazing deal on your next car. And before we go, I wanna invite you to join in my free private Facebook group called dominate your dollars. It’s an amazing group of people who are asking good questions, helping others and reaching their financial goals. Just search for the group on Facebook or text the word dollars, D O L L a R S to the number three, three or four four. And I’ll send you a direct invitation. You can also visit Laura D adams.com where you’ll find my contact information and more about me, my books, and online courses. That’s all for now. I’ll talk to you next week until then here’s to living a richer life. Money girl is a quick and dirty tips podcast. It’s audio engineered by Steve Ricky bird with script editing by Adam Cecil. Our operations at editorial manager is Michelle Marus. Our assistant manager is Emily Miller and our marketing and publicity assistant is Devina Tomlin.

 

If you’re thinking about buying or leasing your first car, you may not know exactly where to start. While you may want to head straight for a dealership, that’s typically not the best first move.

In this post, we’ll cover ten things first-time car owners need to know about the pros and cons of buying versus leasing, how to get the best deal possible, and ways to pay for your new ride.

1. Never go car shopping until you know what you can afford.

Before you start shopping for a car, it’s critical to decide how much car you can afford. A good rule of thumb is to keep your car payment at no more than 10% of your net pay. So, if your take-home pay is $3,800 per month, your car payment shouldn’t exceed $380.

You can get help crunching the numbers by using a Car Loan Payment Calculator. Input different terms and loan amounts to see how it affects your payment. But remember that you’ll also have other expenses to cover, such as fuel, power, insurance, and maintenance not covered by a warranty.

2. Your credit plays a significant role in your monthly payment.

Once you have a price range in mind for your vehicle, checking your credit is a good idea. Auto lenders rely on credit when setting your loan’s interest rate offer. The better your credit, the lower your interest rate will be.

If you have no or poor credit, you may get turned down for a loan or get quoted a relatively high interest rate. With a higher interest rate, you’ll have higher monthly payments. That means you may need to buy or lease a less expensive vehicle or save up enough cash to avoid taking out a loan altogether.

And if you have good or excellent credit, you’ll qualify for competitive interest rates and lower monthly payments. So, if your credit isn’t in good shape right now, it’s worth waiting to get a car loan or lease until you build or rebuild it.

3. Car reviews are critical to consider.

While you might be dreaming about buying or leasing the best-looking car, be sure to browse reviews on popular automotive sites. Vehicles have different ratings based on features such as safety, reliability, resale value, gas mileage, recalls, and handling.

Make sure a potential vehicle will fit your priorities, such as having enough room for the entire family, being comfortable on long trips, or compact enough for city driving. In general, the longer you can keep a car, the better. So be as mindful of your current and future driving needs as possible.

Compare features and prices of different makes and models that interest you and build a test-drive list. If you’re considering a used vehicle, look up their values at online sites like Kelly Blue Book and Edmunds.

4. Research car loans to find the best offer.

To get the best rate on a car loan, you need to do your homework. While you can apply for dealership financing, check with your bank or credit union first to see what APR you can get.

Also, shop and compare car loan interest rates using online lenders. To save the most money on finance charges, shop for the shortest loan term you can afford, which reduces the amount of time you pay interest.

As I mentioned, if your credit is poor, you may be able to get a car loan, but at a higher cost. You may find that credit unions are more lenient than traditional banks and will offer more competitive loans even when you have poor credit. However, you must be a member to use their services.

Credit union membership requirements vary depending on the institution and sometimes can be as simple as making a one-time, low-cost donation to a charity supported by the credit union. To find one, check out Finder.com’s list of the best credit unions or visit ASmarterChoice.org.

Once you’re ready to buy a car, get a loan pre-approval. You must submit personal information such as your Social Security number and salary information so the lender can review your credit and financial history. If you get preapproved, you’ll know the maximum amount you could borrow and your interest rate.

If you’re worried that multiple hard inquiries from lenders will hurt your credit, don’t be. If the inquiries occur within a short period, such as two to three weeks, they typically get treated as one inquiry. In other words, credit bureaus don’t penalize your credit when you’re shopping around and comparing rates for a new credit account.

5. Always avoid getting upside down on a car loan.

Within the first year of ownership, the average new car depreciates about 20%. If you take out a loan and end up owing more than the car is worth, that’s called being “upside-down.”

Consequently, if you decide to sell the car before paying it off, you’ll have to make up any difference between the sales price and the remaining loan balance. So, no one wants to be upside down on a car loan and owe more than it’s worth.

To avoid getting upside down, you can pay a larger auto loan down payment, such as 20% or more. For instance, if a car costs $40,000, try to put down $8,000. In addition to giving you more vehicle equity, it reduces your monthly payments or allows you to shorten the loan repayment period.

Also, consider buying a vehicle that holds its value, so it’s worth more if you decide to sell it. And if you can pay cash for a car, you’ll avoid owing years of interest payments on an auto loan. That could save you thousands of dollars, depending on your loan amount and rate.

6. Understand the differences between buying and leasing a car.

When you lease a car, you sign a contract that allows you to drive it for a period, such as three or four years. It’s less common than buying but has become more popular with the rising cost of vehicles.

You never build equity in a lease deal, so you don’t need to make a large down payment like a car loan. Any down payment you make should be the minimum amount, which is typically 10%.

For instance, say you lease a $45,000 vehicle that will be worth $20,000 in three years when your lease expires. The $25,000 depreciation, minus any down payment, is used to calculate your monthly lease payments.

So, instead of paying a retail price, you only pay for the estimated depreciation of a car during a lease. That’s why it costs less to lease a vehicle than to buy it.

Other than depreciation and any down payment, other factors that determine the monthly payment on a lease include the:

  • Lease term
  • Vehicle’s retail price
  • Your credit
  • Dealer fees
  • State and local taxes

Like with a car loan, the better your credit, the better your terms will be. If you have poor credit, you may have to pay a larger down payment and monthly lease payments.

Since not all cars depreciate equally, it’s always best to lease a vehicle that holds its value. Edmunds and TrueCar are good resources for researching vehicle prices and depreciation rates. At the end of your lease contract, you can return the car to the dealership or opt to purchase it for its depreciated value, also known as the residual value.

Here are the pros of leasing a vehicle:

  • It’s typically more affordable than buying
  • Major repairs are covered (unless your lease exceeds the warranty)
  • You can drive a new car with the latest safety features every few years
  • You avoid the hassle of trading in or selling a vehicle

But consider the following cons of leasing:

  • You don’t build equity
  • You must pay for damages or excessive wear and tear when the lease ends
  • You must pay for mileage overages, such as if you drive more than 10,000 to 12,000 per year
  • Breaking a lease comes with hefty fees

While leasing can be a wise move depending on your finances, goals, and lifestyle, let’s review the pros of buying a car.

When you own a vehicle, you can:

  • Customize it
  • Trade it for another vehicle
  • Sell it
  • Drive it as much as you like
  • Pay off a loan and continue to drive it

Some cons of owning a car include:

  • Making a down payment is typically required
  • Paying higher monthly payments compared to leasing
  • Getting upside down on the loan
  • Being responsible for repair costs after a warranty expires

7. Buying a used car requires due diligence.

You may decide that you don’t want to buy a brand-new car. Getting a used vehicle that’s already depreciated can be a great way to save money. Many dealers offer certified pre-owned or CPO vehicles. They’ve been thoroughly inspected, have low miles, and carry an extended manufacturer warranty.

If you buy a used vehicle from a dealer, they may provide a free car history report. However, if you buy a car from an individual, be sure to purchase a vehicle history report using a site like Carfax or AutoCheck. Look for discrepancies in what a dealer or private party reports about a vehicle and consider them red flags.

Also, always have a car sold by an individual inspected by an outside mechanic before buying it. It might cost a few hundred dollars but is worthwhile if a mechanic uncovered a potentially costly issue.

8. Expect to negotiate your car purchase or lease.

Whether you decide to lease or purchase your first vehicle, you should expect to negotiate the deal. Remember that just because you got preapproved for a specific loan amount doesn’t mean you should spend the maximum.

Use these tips to get the best purchase deal possible:

  • Focus on the price of the car, not the payment. If the car salesperson asks what you want your monthly payment to be, tell them that you only want to discuss the car’s purchase price.
  • Bring information about the best purchase price you found for a vehicle. Show the salesperson your research and say, “If you can beat this price, I’m ready to make a deal.”
  • Know the trade-in value of your vehicle. If you have a car to trade in for a purchase, make sure you have a reasonable price in mind so a dealer can’t offer too little.

Here are some tips for negotiating the best auto lease:

  • Focus on the total cost of the lease, not the payment. The gross capitalized cost is the amount you pay for a lease. The salesperson may ask you what payment you would like, but like with buying a car, the entire cost matters.
  • Ask for a higher mileage allowance. Remember that if you exceed a lease’s mileage, you’ll have to pay an overage fee. So, try to negotiate extra miles for free.
  • Request a lower interest rate. Don’t be afraid to push for a lower interest rate to save money if you have excellent credit.
  • Ask to waive future fees. The dealer charges a disposition fee when you return a car at the end of a lease. Ask them to waive it to sweeten the deal.
  • Discuss the buyout price. If you’re considering buying a vehicle at the end of a lease, let the salesperson know. It’s possible to negotiate a lower price than the anticipated market value of the car.

9. Understand what it means to cosign a car loan or lease.

If you can’t get approved for a car loan or lease on your own, consider asking a family member or friend with good credit to cosign for you. Be aware that the loan or lease payment history gets reported on both your credit reports. So, making payments on time benefits both your credit scores.

However, if you fail to make payments on time, it damages both your credit scores. And if you default on a loan or lease, the lender will hold both of you responsible for the entire debt. So cosigning is a financial move no one should take lightly.

10. Shop for auto insurance as soon as possible.

If you already have car insurance, update the coverage as soon as possible after buying or leasing a car. Most policies include a grace period, such as 30 days, when any new, used, or leased car is covered automatically. Since your vehicle make and model affect your auto insurance premium, your rate could go up or down.

However, when buying or leasing your first car, you must purchase auto insurance before driving your new car home. Since you don’t have a retroactive grace period, driving without insurance would put you at serious financial risk.

If you buy or lease a car from a dealership, it may offer guaranteed asset protection (GAP) insurance. It pays the difference between the amount you owe on your loan or lease and the value the insurance company places on your car. In other words, it protects you from the financial risk of being upside down on a vehicle.

Once you’ve reached a deal, signed the paperwork, and have insurance, take the keys and enjoy your new car!

This article originally appeared on Quick and Dirty Tips.

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About the Author

Laura Adams, Quick and Dirty Tips

Laura Adams, Quick and Dirty Tips

Laura Adams is an award-winning author of multiple books, including Money Girl’s Smart Moves to Grow Rich. Her newest title, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, is an Amazon No. 1 New Release. Laura’s been the writer and host of the popular Money Girl Podcast, a top weekly audio show in Apple Podcasts, since 2008. She’s a frequent source for the national media and has been featured on most major news outlets including NBC, CBS, ABC FOX, Bloomberg, NPR, The New York Times, The Wall Street Journal, The Washington Post, Money, Time, Kiplinger’s, USA Today, U.S News, Huffington Post, Marketplace, Forbes, Fortune, Consumer Reports, MSN, and many other radio, print, and online publications. Millions of readers and listeners benefit from her practical financial advice. Her mission is to empower consumers to live richer lives through her podcasting, speaking, spokesperson, teaching, and advocacy work. Laura received an MBA from the University of Florida. Visit LauraDAdams.com to learn more and connect with her.

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