6 Steps To Getting A Car Loan For the First Time
Shopping for your first car can certainly be exhilarating and exciting. It can also invoke feelings of fear and anxiety, particularly if you are uncertain about how to pay for it. Getting a car is considered a rite of passage of sorts, but it also comes with certain responsibilities that must be taken into consideration. Since many car buyers will seek out financing options to get into the car best suited to them, it is important to consider all of your options before making your final selection. While it is always a good idea to buy a car with cash, not everyone has the discipline to save up enough money. With that in mind, consider the following five steps meant to help you as you apply for a car loan for the first time.
Set Your Budget
Before you set out to purchase a new car, it is important to consider how much you can realistically afford to pay. If you are planning to finance the car, you will want to consider your monthly payments into that equation. The more you can pay down as a deposit on the car, the better, as you will then enjoy lower overall monthly payments and finance charges. There are many types of car loans for first-time buyers, so shop wisely.
Decide Between New and Used
A big decision to be made is whether or not you want, or even need, a new car. While there are advantages to going with a new car, such as an extensive warranty and perhaps better reliability, it comes with the caveat of being much more expensive as well. There are some great used cars out there that offer exceptional value for your money. Check out my guide for how to get a good deal on a used car for help. It really comes down to what you, as a first time car buyer, are comfortable with. Assess your needs, such as how often you will be driving the vehicle and under what conditions, and then decide from there.
Choose a Lender
If you are like many first time car buyers, you will be financing your purchase. However, you will want to carefully consider your choice of lender before you sign on the dotted line for any vehicle. If you have good to great credit, you will be in the position of being able to shop around for your car loan. Make sure you take advantage of this, and do not feel that you need to select the first lender that makes you an offer. You want to look for the lowest possible interest rate that you can get in order to get the best possible deal on the vehicle. This will also help you to stretch your budget even further.
Negotiate the Price
Shopping for a vehicle is really similar to some other purchasing activities. Generally speaking, you are able to negotiate the price and terms of many vehicles. Keep that in mind as you try to find a way to afford the car of your dreams, as it might be more within your reach than you realized. You might also want to do your car shopping during major holiday seasons, as this tends to be a time when dealerships are offering their best promotions. Another strategy is to wait until a new model year comes out, and then work to negotiate a great deal on the previous year’s vehicles. You will not notice that much of a difference, and you could save a noticeable amount of money in the end!
Sign and Start Driving
Once you have successfully navigated the previous five steps, you will be ready to sign the purchasing contract and drive your new car off the lot. This will be an exciting day, but take some time to assess your situation and the responsibility that you are taking on. You want to make sure that you are able to easily pay for the vehicle, so keep that in mind before signing. Get some car insurance and make sure that you are protected throughout.
Final Thoughts
As a first time car buyer, there are many things to consider. These are just five steps that you want to consider focusing on. Take your time and get the vehicle that is right for you in the end.
On loans, if you have an account at a credit union or have access to one, you’ll probably get your best deal there. Your employer or parent’s employee may have a credit union with a great deal.
My daughter and her boyfriend just bought their first car. We checked four credit unions that ranged from 1.9% – 5.5% APR. That’s a BIG difference and you’ll never find 1.9% at a traditional lender.
Shop around and look into credit unions over traditional banks for loans and services.
Tara,
So true – credit unions are really the way to go!!!