Budgeting: Tips for First-Time Car Buyers
“How much should I spend on my first car?” is a great question to ask yourself while assessing your finances. Before you begin car shopping, take a realistic look at your income and spending and set a budget for yourself. When building your budget, remember that the cost of the car itself isn’t the only thing you need to plan for. It’s important to take into consideration other financial obligations that come with car ownership. There are annual registration and tax fees, your monthly auto insurance premium, money for routine maintenance and emergency maintenance, gas, and parking fees if you have to pay to park where you live and/or work.
Comb through your finances and decide how much money you can pay every month while still meeting your other financial obligations and goals. And remember, even if you have a down payment, most people still finance their vehicles with a car loan. When taking out your first-time car loan, a good rule to follow is that your car payment shouldn’t be higher than 20% of your monthly income.
Financing: Auto Loans for First-Time Buyers
Taking out a loan to pay for your car is incredibly common. In fact, car loans make up 9% of all American debt currently. That doesn’t sound like a lot, but when looking at all consumer debt, car loans are ranked third on the list (following student loans at 11% and mortgages at 67%). And there are a lot of different types of loans and loan providers to choose from, which can be overwhelming.
One way to whittle down your options is to explore auto loans for first-time buyers. Some car manufacturers offer auto loans for first-time buyers to try to encourage more people to buy their cars. Some financial institutions also offer first-time car loans to make purchasing your first car easier. Many banks and credit unions, like Oklahoma Central Credit Union, have first-time buyer programs available, too. Like all loans, there are stipulations with first-time car loans and buyer programs. Criteria like age, employment status, and credit score are reviewed and determine eligibility. If you’re new to credit and don’t have any credit history, many auto loans for first-time buyers require a co-signer on the loan.
Have Your First Auto Loan? What to Do Next
Once you acquire a loan, you want to make sure that you make the minimum payment on time every single month — and pay more whenever you can. You never want to miss a payment, or you risk the chance of having your car repossessed.
The most important thing for first-time car buyers is to get prepared financially. Owning a car is a lot more expensive than many people first realize, but car ownership is a great way to learn how to manage your money, set a budget, dip your toe into the world of financing, and begin building your credit.
If you’re a first-time car buyer and are interested in learning more about auto loans for first-time buyers, contact us today! We’ll walk you through all the loans and loan programs available to you.