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Sunday, February 5, 2023
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What You Need to Know About Financing Your First Car?

It is normal for first-time car buyers to imagine how stressful the process will be and wrongly assume that the process of financing a new car is daunting. This is true, but you only feel that way because you do not understand the process.

We all know that confidence is all about being prepared, so taking steps to be ready is essential. There is no point in making your way to the dealership if you are unaware of factors such as the type of vehicle and why you need an auto loan. It is all in the process.

Steps to Take Before Financing Your First Car

Here are steps you need to take or think through before thinking of buying your first car:

Why Are You Getting A Car?

It’s all good and exciting to buy your first car, but why do you want to buy it? Is it to impress friends or to get to work every day? Is it for your periodic long travels or your everyday errands? Answering this question will go a long way in clearing any doubts that might exist and help you make quicker decisions on your car loan. Other questions, such as cost, credit history, loan terms, and car type, will be easily evaluated after this. Answer the questions before moving to the next paragraph. 

Determine How Much You Want to Spend on the Purchase?

As with any car buying, the key to getting satisfied is deciding how much you spend on that purchase, you must have a price range of the loan amount. In other words, what is your budget for the purchase price (in this case, a car)? Factors such as your credit score, savings, monthly income, and the type of car you have in mind determine how much you will be willing to spend on the car dealership. 

While planning the budget, ensure you get the final car price, not just the sticker price. The total cost will comprise all fees, so get it to avoid getting surprised by extra costs when you are ready to purchase your car. The exact figure or an estimate will help you plan your budget well with a good credit score. You will then know the number of months you will need to pay up for car financing.

New or Used?

Which would you prefer, a used car or a new vehicle? Here is the time to do that for people who have not decided. Weigh the pros and cons of used versus new and make a decision.

Save for a Down Payment

It is smart to make a down payment. While there are no specifics about this cost yet, it is advised you put down as much as possible to reduce the cost and stretch it over a long period, depending on the agreement between you and the dealer.

Say you are going for a used vehicle. In that case, it is advised you make a down payment that equates to at least 10% of the total payment. Note that the higher your down payment, the lesser the interest rate will be on your monthly payment. 

Explore Different Options

The world is a lot simpler now, as there are many options to take when it comes to financing. You have more than enough options from banks to credit unions and even some dealerships to choose from, and you should take advantage of that. The reason is you might get better options elsewhere than where you first planned to purchase the car in the first place. Having different quotes will help you, as you can look through many options and make a good choice for your car payment.

Another thing is to ask friends and family how they financed their own car purchases. You might get a discount by just asking.

Take Advantage of the Weather

Weather and seasons affect demand and supply in the car industry. Specific vehicle types sell more at certain times of the year, and that depends on the financing options. Hence, purchasing those cars before certain seasons would be advantageous and cheaper.

Say you want to purchase a vehicle with 4-wheel drive. It would be better to buy it in the hotter months of the year when there is less demand for it.

Also, you can get some vehicles easily and less expensive in some locations than others. For instance, it’s easier to get used pickups in rural areas than in urban areas.

Know Your Credit Score

Your credit score affects the rate of interest you will be charged when financing a car. A higher credit score means a more beneficial interest rate, which will also affect your budget. Free credit scores can be obtained from your credit card provider.

Ensure you check your credit score or report. If you need to wait to let it grow, do so. Otherwise, you are good to go. You can visit Annual Credit Report to get your credit report for free.

Here’s What You Need to Know about Financing Your First Car

Financing your car buying process is not as strenuous as you think. If you can get the process right, it will all go smoothly. Follow the steps listed here, and you will get your car in less than a week with good loan rates.

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