Tips for Buying Your First Car

Mercedes-Benz C-Class

Once you become a licensed driver, next step which is purchasing a new car may seem complicated. Regardless of commute type you will have, it is normal to seek for a vehicle that fulfills any transportation needs. Many first-time buyers are often puzzled about whether they should buy or lease. Mostly they are concerned about insurance rates, length of lease or purchase term and amount of monthly payments. Some preliminary research on possible options can be beneficial in a long run.

Calculate the Expenses

Buying and maintaining a car takes time and money. It is important to plan a budget. Well planned budget can help you decide what car you can afford. Ideally, a customer would like to pay cash for a car, but that is not the case with everyone. Car buyers should account for purchasing a car that they can afford to pay off in 48 months. The down payment for such auto financing option should be a least 20%, so you don’t pay more than the car’s value.

Set a Budget

First, calculate your cost of living, how much money you make, and how much you spend on important things each month. Categorize your expenses in a list and subtract those expenses from the cost of your monthly salary. Once that is calculated, the money left can determine how much you can pay for car payments, insurance, and maintenance (oil changes, registration fees, fuel, and other routine checks). Male another list that includes interest on financing the vehicle and maintenance cost over the term of financing. Then, compare it to earlier calculated budget and see if there will be positive balance left over.

Another option for buyers is to lease the car. Leasing a car is a long-term rental with a leasing agreement that is paid monthly. After your lease term ends, you can purchase the car by paying buy-off amount or you can return it to the dealer. Post-lease purchase will cost you more than if you acquired the vehicle through auto financing. Knowing the cost will help you plan effective budget and beware of what you can afford.

Establish a Credit History

If you are just finishing high school or starting college, you may not have a credit history. Lenders only lend money to those with established credit. This is important if you want to finance or get a loan from a bank, credit union or financing company to buy a car. In order to establish good credit you have to be responsible. When using a credit card to make a purchase, pay on time and in full each month. Then, in a year or 6 months, you will have a credit history and can purchase a car.

Co-signing is Another Option

If your loan application is rejected, you can have a parent or another trusted person to co-sign the loan with you. Once the loan application is approved, it will under both your and cosigners names. Even so, it is your responsibility to pay the loan on time. In the event of you not paying the loan, your co-signers will be responsible for paying it. This is called defaulting on your loan, and is something you do not want to do, due to its adverse effect on credit profile. Timely payments on existing loans can help you establish a good credit history and be approved for loans in the future.

Do Your Research

There are plenty of websites online that can be great resources for finding information about a vehicle you are planning to buy. Research the features and specifications the particular make, model and year comes with. Find out what people have paid for your prospective car in your area. It is good to know the theft rate and how much it will cost to repair it. This can help you save money and find a first car that will meet your needs.

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