5 Affordable Options to Help You Buy Your First Car
Creating a monthly budget that will save money, and help you buy your first car through loans. Make a list of important things, and avoid useless things
Some planning should go into your first car purchase. Failing to think ahead and consider your personal finances can affect you for several years by leaving you with an upside-down loan or a car you can't afford. Before you begin, create an actionable monthly budget for yourself to determine how much you can afford in terms of your loan payments, auto insurance, and vehicle upkeep. Ideally, you should look for ways to spend less and still get the car you want.
Buy a Pre-Owned Vehicle
Many first-time car buyers dream of getting a brand-new vehicle with all of the little extras that will allow them to drive in luxury. However, even when you buy a brand-new vehicle with just the standard options, you'll be paying a considerable amount.
Making this situation even worse is the fact that you'll lose most of that money through the depreciation of the vehicle. A new car or truck will lose up to 40% of its value within the first year of ownership.
The depreciation curve softens after the third year of ownership, so buying a pre-owned car can actually save you more money in the long run. Pre-owned vehicles cost less upfront and they retain more of their value for longer.
Put More Money Down
If you have been saving for a year or longer, you might have enough money to put down a larger initial payment. Keep in mind that you'll also need some of that money for insurance premiums, registration, and the upkeep of your new vehicle.
If you can comfortably put down a larger initial payment, you can finance a lower amount. A smaller vehicle loan means you'll pay less interest and have a shorter repayment term. This can be a favorable trade-off if you want to pay your loan off quickly to enjoy full ownership of the vehicle sooner.
Put Less Money Down
As you shop around for your first vehicle, look for dealerships that offer cheap down payment cars. This can be a desirable option for first-time buyers who don't have much cash for the down payment.
While you'll have a larger loan that will take longer to pay off, the loan installments may be a more manageable option if you need a car in a hurry. If you're leaving home for college or taking a job in a new city, your ability to make a long commute will be easier when you have your own vehicle.
A lower down payment can also leave you more money in your savings account, which you can use for upkeep and repairs.
Give Your Credit Score a Boost
Putting off your first-time car purchase can be a good idea if you have poor or no credit. Take the time to build a better credit score by using a secured credit card and ensuring your bills are paid on time.
If you live on your own or in an off-campus apartment, use a credit-building app to make your rent payments. Building credit is important to your car purchase because it will help you qualify for your auto loan. Additionally, the interest on your loan will be based on your credit score. A higher score will mean paying less interest on your loan.
Consider Leasing Instead of Buying
Finally, consider leasing your first car instead of buying it. On the downside, leasing a car means you will never own it, and this is why it's an option that won't appeal to everyone. However, choosing to lease can get you into a car faster and for less money.
Credit requirements are a little more relaxed when you lease since the dealership will still own the vehicle. You'll also put less money down and your loan payments will be smaller. This is because you're not paying the full purchase price.
Instead, you're just paying for your use of the car during your lease period. When the lease expires, you can renew the lease, lease a different vehicle, or buy a new vehicle of your own.
Taking your time to buy a car can help you save more for the first few months of ownership. This planning stage will also give you time to look for deals and incentives offered by dealerships in your area. By taking advantage of sales, discounts, and other deals, you can save even more on your first-time vehicle purchase.