How to Buy Your First Car in the USA: Guide for New Immmigrants

Public transportation is not very good in the United States. Only the big cities have excellent train and bus systems. In most cities, like Nashville where we live, you need a car to move around.

Here’s a quick guide to buy a car if you have just arrived in the USA.

Borrow or Rent a Car before you arrive.

If you have friends or relatives, borrow a car from them for 5-10 days right after your arrival. If you don’t have any friends or relatives, you can rent a car through RentalCars.com, Expedia.com, or Priceline.com

When we first arrived in August 2015, I rented a car for 5 days. That time frame was enough for me. It meant that I had to visit several dealerships and test drive some cars over this period. But it worked out and before I returned the car, I bought a 2012 Kia Forte.

Buy a Used Car.

I recommend buying a used car instead of a brand new car. Here are several reasons why:

• For immigrants restarting their lives in the US, saving money is always a good policy.
• You do not have a credit history yet. This means that you will be penalized by a higher interest rate.
• Brand new cars are expensive and they depreciate the moment you drive away from the dealership.
• You may be afraid that the used car you buy will be a ‘lemon’ or will be full of defect and damage. There are several ways to avoid this, which I will share later in this article.

We’ve known some of our Filipino neighbors and friends who are spending between $400-$500 a month for their car payments. This is based on a 5-year car loan.

When we bought our 2012 Kia Forte, we got a 6.5% interest rate, which was great! Our monthly payment was $440, but the loan was only for 3 years.

But if you really want a brand new car, here’s a trick. Buy your brand new car at the high interest rate and monthly payment offered by the dealer. After one year of building your credit, apply for a refinancing at a bank or a credit union. This will bring down your interest rates and monthly payment.

Apply for an auto loan at a Credit Union.

Before you visit a dealership, check with your company if there is a credit union that you can apply to. Credit Unions are like cooperatives that offer savings account and financial products to their members at a lower rate than traditional banks.

Dealerships will try to finance your car in-house. Avoid that. Because you don’t have a credit history, they will impose an interest rate as high as 24%.

Most credit unions require their members to belong to a certain neighborhood, or to employees of specific companies. Their interest rates are usually lower and they offer personalized service.

How to Search for and Choose a Car

If you want a brand new car, just identify the type of model and year that you want and go directly to the dealership. It would be as simple as that.

If you agree with me and you are convinced in buying a used car, here are some tips to make the process easier.

• Search for a used car through online marketplaces such as AutoTrader.com, CarGuru.com, Carmax.com, and Cars.com. These websites offer thousands of car listings every day.
• Specify the car features you can live with. Take note of the following information:
  • Budget: specify a budget. Depending on the type of car you want, you may spend between $5000-$16,000 for your car.
  • Make and model (i.e. Ford Escape, Toyota Camry, Mazda CX-7)
  • Model Year. As a general principle, buy a used car that is about 3-7 years old. That was my rule. In 2015, I bought a 2012 Kia Forte. In 2016, though, because we needed another car, I bought a 2007 Ford Escape–inexpensive and it was a good catch!
  • Color: Obviously if you are buying a used car, you are limited to what’s available in the market.
• Avoid a car that had been in an accident. You can check the car’s history through Carfax or AutoCheck. Most online car marketplaces have these features available.
• List 5-10 cars that you are interested in, contact the dealer, and schedule a test drive.
• Schedule a Pre-Purchase Inspection. This costs about $100 but it can save you tons of headaches down the road. You may even get some discounts if you find some defects or damage to the car.

If you’re satisfied with the car you found, then buy it! Pay a bigger downpayment if you can afford it. This will lower your monthly payments.

If you this post helped you, please consider sharing it with your friends or family who are recently arrived in the US, and are planning to buy a car soon.