Congrats! Buying your first car is an exciting and rewarding experience. But while it may be tons of fun, there are some things that you must know as a first time car buyer to ensure that you choose the right vehicle for your needs and budget. Here are some first time car buyer tips to ensure your success.
Knowing exactly what you are in the market for is the key to success when buying a new car. Making a list of required features is a great place to start! Next, feel free to add at the bottom some additional features that would be nice, but are not necessary. The next decision you make will be whether you want to buy a new or used vehicle. Narrowing down the makes and models that fit your requirements will help you to make the most out of your search. Once you discover an estimated price range for vehicles within your scope, you may need to reevaluate your list of wants vs needs, so you don’t waste your time or break your budget.
Before you even consider making an offer on a vehicle, you must know how much you can afford to spend. Review your finances to decide how much you can spare for a down payment now and check your monthly budget to see how much you can spare for a monthly car loan payment. Remember that most car loans range between four and six years, so you must be prepared to make payments over a long period of time. It’s crucial to set realistic boundaries so you can begin to narrow your search to vehicles that won’t break your budget. A lender, will be able to help you establish this budget.
In order to prove you are a reliable car loan candidate you must have a good credit score, show a good credit payment record, have steady employment history, and have the income needed to pay the car loan back on time. In addition, when you work with an experienced lender, they will assess your debt-to-income ratio to ensure that you can afford the monthly auto loan payment.
4: First Time Car Buyers MUST Get Pre-Approved
It is best for first time car buyers to work with an experienced lender to get pre-approved for your car loan before you start car shopping. This will allow you to know exactly how much you can afford and let the auto dealership or seller know that you are ready to do business. When it comes to negotiating a better purchase price, the seller will be aware that the amount of your pre-approved auto loan is the absolute most money you are qualified to spend on your vehicle purchase, saving you both time by avoiding vehicles out of your price range.
If you are concerned about being pre-approved due to the lack of credit history as a first time car buyer, be sure to check with your local lender to see if they offer a First-Time Auto Buyer program. These programs are typically designed for those with little or no credit and are ready to purchase their first vehicle.
For both used and new car purchases, most car loan lenders prefer a down payment at the time of purchase. The typical required down payment is around 20% of the purchase price, although some local lenders offer more flexible requirements. Those with a higher credit rating may not be required to come up with such a large down payment since they have proven they can responsibly pay their bills and manage their finances. Alternately, first time car buyers with poor credit scores may have to pay a larger down payment to secure the car loan.
Prepare for your visit to the dealership by doing your homework before stepping foot on the lot. Knowing your budget after being pre-approved for a car loan and knowing the trade-in value for the car you may be driving now will prove valuable when it comes time to negotiate. Choosing the right car dealership is also crucial. Sometimes local lenders develop partnerships with trusted car dealerships taking some of the unknown pressures out of the experience. With some research, a local lender, and local referrals, finding the right car dealership can offer a pressure-free first time car buyer experience.
If you are not already aware, the negotiated purchase price is not the only money you will need to seal the deal on your first car purchase. It is important to know exactly what additional costs are involved when you buy your new vehicle. Things such as sales tax, vehicle registration, and document fees can add up quickly. You need to know that some of these charges can be included in your financing package, however, some of these will need to be paid up front to complete the purchase.
Don’t wait until your old car completely breaks down, or you get desperate for transportation to start your new car research. Savvy car buyers plan ahead, get pre-approved, and start looking for the perfect new car while there is plenty of time to do so at your own pace with no additional pressure of needing a car immediately. Nothing good comes from rushing into a decision when you are not prepared, so knowing when you will need a new ride and planning ahead is a smart move.
When making your monthly budget, be sure to include car expenses. While your monthly car payment is a given, don’t forget about leaving an allowance for other necessary car-related expenses that might not be quite so obvious. These additional expenses can add up and should be included in your budget. In addition to weekly gas, your new car will need things like auto insurance, license plates, recurring registration costs, and even annual property taxes. Also be prepared to spend money on everything from oil changes and new tires to safety inspections and tune-ups. Plan for these expenses by setting aside money each month so when you need a quick repair or maintenance update, your money is there.
Buying a new car is a big step and is often the first major purchase for many people. It is important to do your research to know exactly what to expect during your first time car buyer experience. When you are ready to get pre-approved for a car loan, it is crucial that you work with an experienced lender to ensure you have professional and trusted advice you can count on.
Finex knows exactly what it takes to get you approved for the car of your dreams. Contact us today if you have questions about becoming a first-time car buyer or to learn more about our auto loans, we are here to help!