If you’re thinking about buying your first car, you may be wondering what other people usually spend on their first car.
After all, you want something that is super reliable and will get you safely from A to B.
So, what is the average first car price?
On average, a dependable first car will cost between $5,000 – $10,000. However, that is not the only cost you must account for. Other related costs include insurance, fuel, maintenance, and repairs.
Keep reading to learn more about budgeting for your first car, some examples of good value first cars to buy, as well as some tips to save money when buying your first car.
What’s A Good Budget For Your First Car?
You can expect to spend between $5,000 and $10,000 on your first car. This is the ‘sweet spot’ where you will find the most value.
Cars under $5,000 tend to be a lot less reliable, while cars over $10,000 are too expensive for most first-time car buyers.
However, the best budget for your first car is – what you can honestly afford.
It’s important that you determine your budget based on your income.
Here are some simple steps to find the right budget for your first car:
- Spend no more than 15% of your gross pay, or 20% of your take-home pay
- Ensure you can make a downpayment of at least 20%
- The maximum loan term for your car should be 48 months
This means if you make $2,500 per month, your monthly car repayment should be no more than $500.
Of course, the higher your income, the newer (and better) the vehicle you can afford.
Other Costs To Consider When Buying Your First Car
Remember, when you purchase a car, you will have more than just the cost of the vehicle to consider.
Some of the other costs you will have to cover are highlighted below.
When it comes to car insurance rates, you will find they range between around $1,424 per year for drivers who are 65 years or older to $7,001 per year for drivers who are 16.
Insurance rates vary greatly because some age groups are believed to be riskier to insure than others.
This is because they are more likely to be involved in an accident and file an expensive claim.
If you are young, you are in the demographic with the most traffic incidents, displaying the riskiest behavior – especially when compared to older drives.
This makes them the most expensive to insure. As you gain more experience behind the wheel, your insurance costs will drop.
Most states have an auto sales tax that is a certain percentage of the total sale price.
The tax differs from state to state.
When you register your vehicle, the DMV will expect you to pay the tax applied to the sale price.
If you are purchasing a used vehicle, regardless of if it is from an individual or a car dealership, you have to have a bill of sale.
This is necessary to register your vehicle.
The bill of sale shows the sale price, which is used to determine the tax you must pay.
On average, you can expect to pay 11.2 cents per mile in fuel.
However, this is just average.
The type of vehicle you have determines the amount of fuel required.
For example, if you purchase a pickup truck, you can expect to pay 13.88 cents per mile.
If you are buying a newer vehicle, you will spend around 10 cents per mile.
Maintenance costs for your first vehicle will likely range around $766.50 per year.
It would help if you considered the cost of tires, as well, which is $147 per year (on average). For late-model cars, this means $913.50.
However, if you buy an older model vehicle, which many first-time car owners do, the number could double.
The amount you will wind up paying is dependent on your specific circumstances. If you properly care for your vehicle, the maintenance vehicles will be less.
You might also like: How Old Should New Tires Be? (Explained)
Financing vs Cash
If you finance your vehicle, you can typically get a newer and better vehicle than paying cash.
However, when you finance, you also have a monthly payment and interest applied each month. This means you are always paying more than the sticker price.
When you pay cash, you may have to settle for an older model vehicle, but it is yours – free and clear.
No payments and no interest.
For your first vehicle, paying cash is a smart option.
However, if you can budget for ongoing payments and want a newer or better vehicle, financing is a better option.
Top 5 First Cars To Buy
If you are ready to buy, learning what the best value first cars are is beneficial.
Here are some of our top picks:
1. Honda Civic 2001-Present
The starting price for this vehicle is around $5,000. If you are looking for a virtually bulletproof vehicle, you cannot beat the Honda Civic.
With proper maintenance, you can expect this car to last for 250K miles – or more – without issues.
Also, it is considered one of the most popular vehicles in the world, which means it is easy to find parts and spares when needed for affordable prices.
You might also like: Is A Honda Civic A Good First Car? (Explained)
2. 2012 Ford Fusion
The average cost of the 2012 Ford Fusion is around $7,509. It received the award for the Best Affordable Midsized Car for the Money.
It comes with a V6 engine, superior handling, and beautiful interior styling.
There are plenty of features offered with this vehicle, which will more than suit young drivers and help to keep them safe while on the road.
3. Volkswagen Golf
When it comes to safety, you cannot beat the features offered by the Volkswagen Golf.
However, this vehicle does come at a higher price point of $21,805.
Some of the features you will see include blind-spot monitoring, rear cross-traffic alert, automated emergency braking, and forward-collision warning.
This is as close to a tank as you can get for young drivers – if you have the budget.
4. 2017 Hyundai Accent
Considered a more conventional vehicle than it is Smart, the 2017 Hyundai Accent is available for under $10K across the country.
You can find several options, including the five-door hatchback or the subcompact sedan.
This car is easy (and even fun) to drive, is fuel-efficient, and you may find one that still holds some of its original factory warranty.
You might also like: How long do Hyundai Accents last?
5. Toyota Prius
Considered a top safety pick by the IIHS – Insurance Institute for Highway Safety is the Toyota Prius.
It features four braking systems, brake assist, and vehicle stability control.
It is easy to see why so many of these vehicles are on the road.
Also, the Prius is fuel-efficient and eco-friendly.
How To Save Money On Your First Car
Here are some useful tips that will help you save money n your first car.
Used Cars Are Better Value Than New Cars
When you factor in depreciation, used cars provide a much better value than new cars.
While new cars do come with more technology, this technology comes at a premium.
Also, older models can be equipped with technology options to provide the same operability level as newer versions.
Smaller Engines Are Cheaper To Run
If you choose a vehicle with a larger engine, it burns more fuel with each RPM (revolution per minute).
This means smaller engines are more economical to operate.
Petrol Is Cheaper Than Diesel
Diesel engines are more efficient; however, petrol engines operate at more affordable prices.
It is up to you to choose between efficiency and affordability.
Manual Cars Are cheaper than automatic
On average, manual cars are about $1,000 cheaper than automatic vehicles.
Also, older manual vehicles have improved fuel economy than automatics that are a similar age.
Hybrid Cars Run Cheap, But Are More Expesnive
While Hybrid vehicles are more affordable to operate, they are also more expensive to purchase.
You have to consider if the higher initial cost is worth the long-term savings you are likely to see.
Smaller Cars Are Cheaper To Insure
While you may think that purchasing smaller vehicles results in lower insurance costs, this is not always the case.
According to many studies, the cheapest cars to insure are typically sturdy and bigger trucks, SUVs, and minivans.
That is because they are easier to see while on the road.
Choose A Car That Holds Its Value
Choose cars like the Ford Fusion or Honda Civic (listed above) which are popular, reliable and hold their value well.
This means you will be able to recover more of your initial investment when the time comes to sell.
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