There is no doubt that buying a car for the first time is an exciting experience, but it is also one that you need to be prepared for. After all, car salespeople are hardly known to be the most scrupulous of characters! If you have the kind of car that you want and a general budget in mind, you have only done half the work. The other half involves deciding on how you are going to finance your purchase. Unless you have a huge pile of cash stockpiled for this occasion, you will need to look into loan and car financing options. And there is no doubt that this can be a complicated area. So, to give you a helping hand, here are just a few of the basics to consider.
Know Before You Go
Before you head down to your nearest car showroom, it is worth understanding the basics of a typical car loan in more detail. Essentially, this can be broken down into the total amount you finance, the interest rate, the length of the loan, and your monthly repayments. Before you get seduced by that ad for zero percent financing, you need to know if you have a credit score which is strong enough to qualify for it. Once you have seen a few different offers, you can then use an auto loan calculator to determine which is the one which is right for you. You also may want to consider getting preapproved for an auto loan from your bank or credit union so that you can encourage the dealership to make you a more competitive offer.
Loan Length is Important
The length of your car loan is certainly worth taking into account. While longer loans mean cheaper monthly payments, you will often have to pay more elsewhere. New cars depreciate from the moment they are driven off the lot, and this occurs at a very steep rate indeed. You also need to think about what would happen in the event of a crash or theft, and whether your insurance policy will cover what you still owe in the loan. And if you are locked into a longer deal, it becomes much trickier to suddenly change your mind and switch to a different car. To get around this issue, you could commit to a shorter loan with higher monthly repayment. Of course, you will have to budget for this carefully to ensure that you can afford the repayments. And if you make the commitment to put down more cash as a downpayment, you will also maintain positive equity in your car for the duration of its ownership.
There is certainly a lot to consider when it comes to buying a car for the first time, and the financing should be a central part of your considerations. Your best bet is to do as much research as you can beforehand to put yourself in the strongest possible position.