Budget Building Blocks: Tips for Financing Your First Car
Saturday, June 25, 2016, 6:00 AM | Leave Comment
Having a car provides you with a sense of freedom that is difficult to put into words. Buying your own is a great opportunity, and probably one of your first big purchases. This is also a time to be careful as you think about future finances.
When certain steps are followed, financing your first car can be a positive experience.
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Know Your Budget
It’s important not to give into the desire to get your dream car and choose one that will fit comfortably into your budget instead. This might mean compromising on some features or models.
The first car you get should be considered for transportation and not to provide status. Establishing a budget and keeping it are essential.
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Get Financing First
Experts agree you should not visit a car dealership unless all your vehicle financing is already in place. Compare car financing rates with a number of different lending institutions. This includes banks, credit unions, and more.
Some people wait to get financing until they have had a chance to improve their credit score as well. Check to see how yours is and talk to your bank before deciding where to shop.
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Payments
You will have to consider how much you want to give as a down payment and how much you can afford for monthly payments on any kind of car. A payment buyer will focus on a vehicle’s monthly payments instead of its total cost.
This is something car salespeople use to their advantage. Experts recommend you go online and use a loan calculator to determine how much you can realistically spend on a vehicle.
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Interest Rate
The goal when getting financing is to get the lowest annual percentage rate (APR) possible. This will be determined by where you get your loan as well as your credit history.
A used car will offer a lower depreciation and more car for the amount paid, but they also come with a higher APR than a new car.
Used cars can also be expensive if they come with more repairs than you might like, however if you know how to do some of your own fixes and get used parts from places like U Pull & Pay you can save money on these kinds of expenses.
Know the future of your car and what kind of investment it might be for you in the long run.
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Terms
Car financing experts recommend not getting a loan that takes longer than 48 months to pay. There will be a temptation to have longer payment terms since this may enable you to have a higher-end vehicle.
With longer payment terms, even if the interest rate is low, you’ll end up paying more in interest than is recommended. If the vehicle ends up being in an accident or stolen, there is a chance the insurance company will only give you a fraction of the loan amount.
When you take the time to have all your financing in place before shopping for a vehicle, it puts you in control. You’ll know what you can afford and this means your first-time car buying experience will get you the vehicle and payments you can afford.
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