Tips for Financing Your First Car
Whether you have just finished with your studies or have had enough of driving that old vehicle, you’ve made the decision to finance your first car. Before you sign the paperwork and put down the money, what do you need to know about this process?
In the world of cars, a lot of different terms are used, so it’s important to understand what finance really is. With finance, you own the car, and you have the freedom to put as many miles on it as you want. At the dealership, you will put a certain amount of money down once you have negotiated an interest comparison rate. The rest of the cost, plus the interest, will be divided up amongst your monthly payments. The period could be 36 months, 48 months and so forth.
The Types of Available Cars
Before you go to the car dealership, you can research what is available on the Internet. Many people finance cars that are either one or two years old, but you do not necessarily have to do this. You could look for a slightly older model; however, you want to make sure that it’s worth your money and that you consider how it is going to do in the long term. From browsing through the inventory online, you might find that a brand new vehicle is not going to cost you much more than one that is a few years old, and the former car will likely be safer and run more efficiently.
At the dealership, you are going to have to put down a sum of money for the vehicle. Some programs will not require such a payment, but these are generally geared toward those in poor financial situations. As a result, the interest rates can be rather high. The amount of down payment you should save up really depends upon the car you are buying. It would be smart to inquire about different price packages earlier to find out how much of a payment you should save.
Calculating Monthly Payments
Essentially, the amount of your monthly payments is going to be the total price of your vehicle minus the down payment divided by the number of months for which you are paying. However, you will also have an interest rate added into that total. The interest rate is based off of a few different factors, but your credit score is going to play a significant role in that. People who have lower credit scores usually see higher interest rates on their bills. Now is the time to start working toward repairing your credit score.
Negotiating the Price
Here is one of the toughest parts of financing a car, and many first-time car financers are at least a bit intimidated by the process. See what the various prices are at other dealerships in the area, and you can use this information to help negotiate. You can also ask if there is any way that the sticker price of the vehicle can be lowered. You might put a larger down payment, or maybe you will look into financing the car for a longer period of time to get the desired price.
You want to find out what types of services the dealership provides in regards to maintenance of your vehicle. They might offer free oil changes for the first year or something of that nature. Whatever the case may be, it’s important to have all of this information clearly spelled out before you. You want to read through all of the terms of your warranty and service contract before putting your name on them.
The process of financing your first car has a number of steps that you need to consider. You’ll know they were worth it when you are driving home in a lovely new vehicle.
Erin Warbrook is a freelance writer with a speciality in personal finance working with clients to simplify car finance in Perth, Australia.