I still remember the first time I drove a car. I was 15 and I had just passed my learner’s permit test at the DMV, and of course my mom had driven me there, so I was headed home with her. A learner’s permit allows you to drive while accompanied by a licensed adult. Naturally, I asked her if I could drive home. To my surprise, she said yes! It was the ride of my life. I barely knew the gas pedal from the brake. Somehow, probably through divine intervention, we made it home and to this day, she still can’t wrap her mind around why she said yes to me in that moment.

Having a car as an adult gives you a sense of freedom. Whether you’ve been on your own for awhile or you’re headed to school or a new job, transportation is a need for most people. However, the car market is huge and a little intimidating… so let’s break it down.

Used vs New

The first important distinction is between used and new cars. New cars are the ones with only a couple miles, manufactured the same year you buy them. No previous owners. All the bells and whistles. And all the cost. The funny thing is that most people I know would still consider a 2-year-old car pretty new. These slightly older cars literally have all the same features and basically no difference in the driving experience.

Still not convinced? How about this – guess what the price difference is between the same car model just 2 years apart, one brand new and one 2 years old? The average car purchase data says that in the first 2 years after a car is sold, the price decreases by around 30%. To make the math easy, let’s take a car that sells brand new for $30,000. After two years, that exact same car will be worth just $21,000. That’s bad news for the seller, but great news for the buyer! The other great news is that depreciation (decrease in car value) slows down as the years go by. So, when you buy used, you end up saving a ton of money. Not much can happen in two years, either, so no need to worry about unexpected repairs or maintenance.

With that out of the way, let’s move on to the fundamental steps of the car buying process.