Buying your first car can feel a lot like a rite of passage for some, and rightly so. That being said, you’ve got to move carefully and with much consideration when it comes to buys as major as an automobile. Learn about car loans for first-time buyers and some of the most common pitfalls to look out for.
Establish a Budget
One of the first things you’ll want to do is establish a budget that includes a monthly car payment. When you have an idea of how much money you’ll have leftover after taking care of your other financial obligations, you’ll know how much of a monthly car payment you can easily afford without risking missed payments or living from paycheck to paycheck.
Preapproval lets you know how much you’ll likely be able to borrow with your current credit score. Getting preapproved also lets you know what lenders see when they run a credit check to see how much they can let you borrow, which can take a lot of stress out of the car-buying process. You can get preapproved through a bank or credit union, or even an online lender.
Save Up For Your Down Payment
Just because you’re preapproved for a $20,000 car loan doesn’t mean you have to (or that you should) accept all $20,000. Do yourself a huge favor and save up as much as you can for your down payment so you don’t have to borrow as much to take care of the rest of the cost of the car you’ve got in mind. A good rule of thumb is to save up at least 20 percent of the total cost of the car you’ve got in mind, but some dealerships will accept less. That being said, save up as much as possible to keep from having to pay more in interest on a bigger loan.
Check Your Credit Report
Your credit score is one of your biggest advantages when it comes to buying a car, which you likely already know. When you decide you’re going to buy a car for the first time, go ahead and order a free credit report. Look over it to see if there are any discrepancies or either inaccurate or outdated information that needs to be cleared up. Again, this is information lenders will see when they pull your credit, so you might as well know what they’re going to see.
Don’t Forget About Insurance
While you’re figuring out the budget for your car payment, make sure you don’t forget about those monthly insurance premiums. Know that you have more sway over the overall cost of insurance than you might think. For instance, less expensive cars, those with lots of safety features and models with a low repair cost often result in less-expensive insurance. Your driving record, where you’ll park your car at night and whether you choose to bundle policies also impact overall cost. Before you buy, be sure to talk with your insurance provider to get a solid idea of how much you’ll likely have to pay in premiums for the car you’re thinking of buying.
Improve Your Credit
While you’re looking over your credit report, don’t forget about your credit score. Even if you already have a solid score, it never hurts to do what you can to raise it a few points. Pay your bills on time, pay down your current cards as much as you can before applying for financing and refrain from opening up any new lines of credit in the months leading up to buying a car so you don’t risk dinging your credit score.
Research the Price of the Car You’re Considering
While some fees and extra costs are common with cars, you should still know the current price for the car you’re thinking of getting. This information lets you know whether the dealership is gouging you on the price, in which case you might want to think about taking your business elsewhere. Know that some fees can be skipped or negotiated, such as dealer preparation fees, credit life insurance, disability insurance and fabric protection. Read over the final contract carefully to make sure fees aren’t being sneaked in.
Take your time and shop smart when buying a car for the first time. Be sure to ask for additional advice from friends and family members who have bought a car before.