If you are getting ready to buy your first car, you have many things to consider, such as your transportation needs and your budget. The average price of a used car in the U.S. is $16,800, and the average price of a new vehicle is $32,086. At those figures, you need to find a motor vehicle that you can finance and that will last you for some time to come.
When you prepare your car budget, you need to include more than your payments. You need to estimate how much you spend on fuel per month and include money for car maintenance and repair. When it comes to choosing your car, do not settle on a vehicle that will take longer than 48 months to pay off because any longer is an undue financial burden. Also, plan to put down 20% on your vehicle to avoid the car buyer's nightmare of being "upside down," or owing more on it than it is worth. As soon as you drive a new car off the lot, it depreciates as much as 11%, meaning that you have lost several thousand dollars before you even get it home.
Depending on your credit history, you will have several options to finance your first vehicle. Dealer financing programs are a possibility if you have an established line of credit, but they may not offer the best interest rate. Before you go through a dealer program, speak to your bank or credit union and see what the loan officers there can do for you. If you have poor credit or no credit history, you may need to find someone to cosign your loan. Your parents might be willing to help you, but remember that you are risking their credit if you do not keep up with your installment payments.
Leasing may be appropriate for you because it keeps your payments lower than if you were buying a new vehicle. You are essentially paying for the vehicle's depreciation and other fees for a set period of time. At the end of your lease agreement, you will either turn the vehicle back in or buy it for a previously agreed-on price.
Buying your first car is a big commitment, so do your financial homework. Know what you can afford to pay and have your financing set up in advance if possible. Never agree to a loan with payments that you cannot easily handle. If you navigate the financing part correctly, you will be better able to enjoy your new ride.Share