If you’re looking into financing your first car, keep in mind that the process involves a lot to manage properly, but that some step-by-step tips can help ensure finding just the right car for you. Preplanning is key and doing your research about your choices is important. The Internet is great for this.
Here are some things to keep in mind in looking for and financing your first car with success and satisfaction:
- Decide on your needs. Do you need a daily driver to go back and forth to work or school or a car just for weekend trips? How’s the weather where you live – hot, cold, snowy or rainy? How much seating and cargo space do you require? In your research, look at different options and features available, which ones are important to you and how much they affect a car’s cost.
- Consider your budget and financing. Take a realistic look at what you can afford as a down payment and how much your monthly budget can take on. Consider your monthly car payment, insurance, fuel, maintenance, repairs parking and tolls. Get preapproved for a loan at your bank or credit union before setting foot in a dealership so you know how much you have to spend. Don’t let them upsell you to a higher priced car that you can’t really afford.
- Put at least 20% down if possible. You may be able to get a zero-down loan but interest rates may be higher and monthly payments will definitely be higher. You may need to get a co-signer for your loan if you’re younger, so keep this in mind.
- Decide whether you want to buy new or used. A new car may be safer and have more bells and whistles but it will also be more expensive to buy and to insure. Also, remember that a new car depreciates significantly in value as soon as it’s driven off the car lot. If buying used, make sure the vehicle has been certified.
- Get a short term loan. When financing a car, stick to a short-term loan. It should be no longer than five years and preferably shorter. Dealers may offer as much as a seven year loan to bring down the monthly payments and allow you to buy a more expensive vehicle but you’ll end up paying hundreds (if not thousands) more in interest charges in the long run.