Car Buying Advice For The First Time Buyer
Buying a car for the first time can be confusing. It doesn’t have to be. Unfortunately, public schooling doesn’t teach you how to handle these big time life events. Instead of teaching you how to manage your credit or buy a car they teach you about geometry.
Here are some tips to help you understand the ins and outs to buying a car for the first time.
1. Credit: If you’re a first time buyer fresh out of high school you have no credit history. This makes buying a car a little more difficult. Credit can help you apply and get loans but if you don’t have this credit history then it will be tough to get a loan.
There are a few ways to overcome this. If you have someone to co-sign (like your mom or dad) then dealerships will be able to sell you a car. Having your mom, dad or other relative on the loan gives the dealership credit history to sell you a loan. A lot of banks or credit unions won’t take you as a first time buyer. If you’re a first time buyer and your mom, dad or relative has bad credit then your best bet is to go to a buy here pay here dealership.
2. Down payment: Everyone wants to get into a car for no money down. Why? It’s convenient and easier to fit the monthly payment into your monthly budget. No one likes having to put money down on a car but it actually has plenty of benefits.
When you buy a car you have to pay taxes. If you put no money down then the taxes go into the monthly payments and you end up paying more a month. Putting money down on the car will save you money in the long run by paying down the principal up front. Think of it kind of like a savings plan.
Putting more money towards a car will actually increase the chances that you’ll pay the loan off. I’m not sure why this is but it’s important to pay off your loan to build your credit. If you’re a first time buyer that car loan will go a long way in establishing yourself and helping you down the road. Paying off a car loan is a good start to building solid credit history for the rest of your life. If you end up defaulting on the loan it can take a very long time to fix and make up for it.
3. Monthly Payments: If you’ve bought a car before this may seem like common sense. For the sake of helping the first time buyer, monthly payments go towards the principal of the loan after the interest. Depending on your credit history you’re assigned a certain percent of interest each and every month. This is determined by how high risk someone is. Because a first time buyer has no credit history they are more of a risk to loan money to. This is another reason why establishing credit history is important. Your interest will be much lower and you’ll save a lot more money over the long run.
4. Buy used: Buying used is the way to go the first time you buy. Why? you’ll save a lot more money over the long run. When you buy a new car once you sign the paper work you’ve lost money on the value of the car. You can get a lot more value when you buy used. You can also learn how to properly maintain your car so it lasts. It’s better to do this with a less expensive car that won’t cost as much to maintain. Buy used, establish your credit and get a new car for a lot lower interest rates later in life.