Getting What You Want: How to Finance Your First Car
Thursday, April 10, 2014, 1:00 PM | Leave Comment
Buying your first car is a fun and exciting experience. Test driving your favorite vehicles at your local dealership can be quite gratifying. Unfortunately, many first-time buyers miss out on the fun of car shopping because they stress out about how to finance their purchase.
This type of stress is easily avoidable in four simple steps.
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Establish a Budget
Whether you will be paying with cash, or you will be taking out a loan, you need to know how much you can afford. Having an established budget will help you determine what kind of car you are looking for, and will give you an idea of whether you should look for a new or pre-owned vehicle.
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Know What You Can Spend Monthly
If you decide you finance your new car, you need to know what you can afford to pay each month. To estimate your monthly payments, figure that your monthly payment will be $25 per month for every $1000 you borrow for a total of 48 months.
For example, if you finance a $20,000 car, your monthly payment will be roughly $500 per month for four years. However, it should be noted that this does not include the cost of insurance, taxes, fuel, and maintenance.
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Determine Your Desired Purchase Price
Using your established budget, you can determine what kind of car you’re looking for. Once you find something you like, you can begin to research the proper purchase price. One easy way to do this is to use Kelley Blue Book online.
KBB can help you determine what the fair market value is for a particular make and model in your geographical area. This knowledge will help you figure out which cars are being offered at a good price.
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Know Your Options and Secure Financing
Once you’ve found your vehicle of choice, it’s time to purchase your first car. If you are financing, you have several options depending on your credit score.
You can finance a car purchase through the car dealer, or if you plan ahead, you can secure financing from your bank or credit union. Even some insurance providers will finance your car.
If your credit history is relatively new, you may not have as many choices, but always seek the lowest possible interest rate.
Having a financing strategy in place will allow you to focus on finding the car that meets your needs and wants. Now that you have a plan of action for financing your first car, you can begin to enjoy the car shopping experience and find the Premier Mazda or rugged jeep you’ve been searching for.
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