Buying a car for the first time can be a daunting process. Probably one you’ve dreamed about for a long time, imagining the sporty, new ride that you’d be proud to drive around. At least, that was the dream before finances, loans and expenses got in the way. So before making what is likely the first major purchase of your adult life, here are a few important tips to remember:
1. Establish Credit Being without credit leaves you in the same position as a person with bad credit; this is why it is essential to establish that credit before making any large purchases. Be it a credit card from a store or student loans that have plagued you since graduation, credit is easy to acquire and simple to maintain as long as you have the proper financial stability resources to guide you. The best way to establish good credit is by paying off your credit card bills completely at the end of each month. However, this is not always feasible, so be sure you are making your monthly payments on time and you do not leave any outstanding balances. Just pay bills on time and you’ll be approved to finance your first vehicle. Check out the “Ins and Outs of Money” podcasts on getting credit here.
2. Manage Your Expectations A first car is something that should be dependable, practical, and affordable. Budgeting and saving for that initial car payment are essential; however, that is not the only expense. You also have to consider gas, insurance, maintenance and even repairs. Buy a car you can afford. Overall, you will be more pleased buying a car a little under you price range and saving money for other aspects of life, rather than splurging on a more expensive car.
3. Buying vs. Leasing Leasing a vehicle means you are at the mercy of the dealers, the bank and the law. The advantages of leasing a car are low to no down payment, lower monthly payments than with buying, and lower sales tax. If your future is set, you’re staying in the same state, and your driving is limited to the allowance of the dealer, then leasing is an option. If not, purchasing a car may be the better option. The advantage is that you own it. If you decide it’s not the right car, you can always sell it. If you break it, you already bought it. And it’s another way to build credit for when your purchases get bigger.
4. The Car Search The car search can be intimidating, but it should be fun hunting. Just remember these tips, do research, do more research and you’ll be driving the car of your carefully managed dreams.
For more advice on buying a car or other large purchases check out the Financial Stability Alliance’s resource, Big Purchases, for great tips and advice.