Driving away in your very first car is one of the most exciting purchases of life, especially if it is the first time you have ever purchased a car. As with any first time things, it might just be a daunting task attempting to understand all of the items related to financing and buying a car. If you have just started with a new job or just out of college a car to drive will be a necessity.
The only two options to get your dream car are either to pay cash for it or financing. The reality is for the student or first time car buyer buying an automobile with cash is out of their reach and with limited or no credit score track record, it in reality gets difficult to secure vehicle financing. Sooner or later, it might be straight forward to qualify for a car loan financing if they consider few different factors before applying which can increase their chances of being approved for a initial car loan. Below are few known but important questions which a person who is a first time buyer needs to deliberate before applying for car loan financing.
Should I fill out an application for New or used Car?
Being right out of a university or a first time car buyer, it becomes your prime concern to know which car would be best for you, when you are still juggling with your finances, paying back student loans and building credit. Both new and used cars have pros and cons of their own. Generally, used cars cost less than new cars due to the fact its already depreciated in value at the time of purchase as compared to new car which depreciates by 30 percent when they are driven off of the car dealers lot. Even if the price seems smaller, the rate of interest charged for used auto loan financing is most of the time higher due to decreased resale value, and risk of loss to the lender in situation of borrower’s default. Moreover, you need to keep in mind the maintenance and improving cost if you are thinking to acquire a used car since these cars are older it may cost you more to maintain the vehicle. Therefore, it would be recommended to take a mechanic with you while getting a used car. Be sure to ask the lender about an extended service contract that will protect you from mechanical breakdowns while you own the car. A little added peace of mind if purchasing a used car.
Do I need a co-signer?
The first time buyer will generally have nothing on their credit report which can be said as a plus in some cases rather than having negativity or problem credit score background. Nevertheless, due to their unproven credit worthiness for a lender it’s just like making a loan blindly. Most lenders will not make an auto loan to a first time buyer because of the high risk associated with it. The simple way to overcome this, would be finding a co-signer. A co-signer might be any individual who has an established credit score and agrees to make payments if the original debtor defaults by co-signing the loan papers. In this way, the lenders risk is divided between the very first time buyer and his co-signer. Most of the time a co-signer is a family member like a parent.
Do I have sufficient cash down?
This question may seem of less importance to the majority of people, but this has the major effect on the car purchase and financing. Putting up a sizable down payment can reduce your monthly car loan financing payments, which ultimately helps you staying within your budget. In addition to that, a minimum of 20% down can assist you in being upside down on your car, where you owe more on car than its worth. In this competitive market you can find lenders who will approve you for no money down car loans but not as a first time car buyer. The larger the down payment, the better odds you have of getting approved without a co-signer.
Can getting pre-approved help me?
Pre approved auto loans are always to your advantage. Purchasing pre-approved for a first car loan financing can be one of the super ways of assuring car financing and one with little effort on your part. By having that approval in your hand before stepping foot into the dealership will help you in the negotiations of that car you are purchasing as well.
There are several online finance sources for you to tap into. Many allow you to complete an application and get a loan decision within minutes. Getting that first time car loan can be scary, but with the right research and lending partner, you can be on the way in that new ride in no time. You can find more helpful information about car loans and refinancing online at OpenRoad Lending.