How much could you save?
Are you thinking about how you're going to pay for your first car? You could get it:
- As a gift or hand-me-down from your family
- With cash you earned from your job
- With an interest-free loan from your parents
But what if none of these options are open to you?
You could get a loan. Here's how:
Step one: Save for a down payment
It's possible to finance 100% of a vehicle purchase. But why not save money in the long run by making a down payment?
When you make a down payment, you need to borrow less. This means your monthly payment decreases, along with the total amount you pay in interest charges on your loan.
Step two: Find a co-signer
When you have a co-signer the loan is in your name.
Usually, if you are younger than 18, you will need to have a co-signer for the loan.
Even if you are 18 or older, some lenders require a co-signer, especially for borrowers with little credit history. Each credit union sets their own standards for granting loans.
A co-signer is someone who agrees to pay back the loan if you don't.
Not just anyone will be willing to do this for you. Often, a parent or an older sibling will. You have a serious obligation to your co-signer to pay the loan in full and to make all payments on time.
If you can't find anyone to co-sign the loan, the lender will consider it a signal of potential risk and might not be willing to grant the loan.
Should you take the rebate or the dealer-financed low interest rate?
Step three: Get the best loanPut yourself in a strong position by:
- Doing your financing homework
- Arranging your loan financing at the credit union ahead of time
Another benefit of arranging your financing in advance: It takes the pressure off when dealers offer you their special low-rate financing (based on a higher sticker price). They may offer you a rebate. Do the math, or ask the loan officer at your credit union to help you with it.What if it's too late, and you're paying too much for financing at a dealer?
When you work out your payment plan, consider all the expenses of owning a car.
Use the rebate as part of your down payment to reduce the total amount of the loan.
You'll pay less in finance charges and have a smaller monthly payment.
Read on to step four and the conclusion of this article...