Financing Tips for First-Time Car Buyers
Buying a car for the first time can leave you feeling uncertain, anxious and very overwhelmed. The best way to alleviate that uncertainty is to gain knowledge about the process. As a first-time car buyer, it is imperative that you are aware of the barriers you may face. This article is going to discuss some of the most important things you should know as a first-time car buyer.
First-Time Car Buying Obstacles
As a first-time car buyer you may face a few obstacles that you should consider before you beginning your car search. Some of the most common barriers that first-time car buyers must overcome include:
- Lack of or no credit history. Why do you need credit to buy a car? Well lenders want to see that you are good for the money. They want to make sure you will pay them back. So what do you do if you have no credit? Establish credit. In order to establish credit you will have to wait six months to get a vehicle. During that time, you will have to open a credit card or bill in your name and make on-time payments for at least 6 months. After six months of working on your credit, you should have an easier time getting a loan. If you still cannot obtain a loan, considering having a co-signer.
- Insurance rates for people under 25 can be costly. Insurance is a must as it is illegal to operating a vehicle without auto insurance. The cost of insurance could impact your purchase, and therefore should be factored in to your total expenses of buying and owning a car. You need to make sure you are able to afford your car payments as well as the insurance payments. Getting yourself in a financial bind could hinder your credit score, making it even more difficult to buy a car in the future.
- Lenders won’t approve loans for cars that exceed 5 years of age. It is not uncommon to buy a used car as a first-time car buyer. Unfortunately, most lenders will not give out loans for cars that are older than five years. This can really limit your options as a new or newer car can be much pricier. It is best to make sure you that a lender will approve a car you can afford.
- Banks are hesitant to give loans to first-time car buyers. Even with credit history, this economy has caused banks to become more hesitant to give a loan to first-time car buyers. There is a lot that goes in to owning a car including insurance coverage, regular maintenance and repairs. It is difficult for banks to determine if you fully understand the costly responsibilities of owning a car. Again, having a co-signer that has successfully owned a few vehicles could help in this type of situation.
- Dealers take advantage of new buyers. No matter how much buying experience you have, everyone has to be cautious of slimy car dealers. If you know someone who knows a lot about cars, or has a trusted dealer, consider consulting with them. You can also talk to your bank representative or attorney before signing any papers. If you end up in a situation where a dealer has taken advantage of you, the best thing you can do at that point is evaluate refinancing options after six months to get a lower rate.
Smart Financing for First-Time Car Buyers
Following these tips will help you make a well-informed decision when buying your first car. Buying a car is a big purchase and can greatly impact your credit, so you want to do it the right way. When deciding to buy a new car, make sure you keep in mind credit history, insurance costs, the lending terms, and shady car dealers.
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