Financing Your First Car
Obtaining your licence and buying your first car is a great moment, but first of all you need to find some money for the car.
If you’ve been disciplined and saved your own hard earned cash for your first car then you are doing a lot better than many people. If your parents are buying a car for you then you are very lucky.
But if you have to buy your own car and you haven’t saved enough cash for it, you’re going to have to finance your first car.
There are a number of options for purchasing your first car, however they may not all be viable options for you depending on your own personal circumstances.
If you have a secure job and a few dollars put aside for a deposit you will have a much better chance of obtaining a favourable finance option.
Going to your bank is a popular option for many people looking to buy a car. Banks tend to have a number of loan option available and it could be worth visiting a few to get a more competitive quote.
The banks will generally be more selective with who they will lend money to. If you are working in a permanent job you will often need to have been there for six months, and if you have a casual job you will need to have been there for at least twelve months in some cases.
Some banks will also want to see a decent history of savings. Although they may not require you to put down a deposit from your savings, they will still want to see that you have the ability and discipline to save.
Obtaining finance for your first car from a financing company can be a good option if you do not qualify for a loan through your bank or you don't want to deal with a bank.
Whilst finance companies can be easier to obtain finance from, they also often charge higher interest rates and fees, and may have tighter restrictions on repaying the loan earlier. Like with all finance decisions, do your homework by comparing rates, fees, pros and cons and make a decision that suits your personal situation.
Bborrowing money for your first car is through family is sometimes an option. This could be via your parents, grandparents or any other family member who has some spare cash lying around.
A family member may be able to lend you the money interest free, or even with a small interest rate, which will save you money over borrowing through a bank or finance company. Just be careful though - you don't want family relationships to go sour over a dispute over money. So it's worth talking in depth about a variety of scenarios with the family member and having it all clearly in writing.
Choosing a Loan
The most important factor for most people will be the cost of the loan. You will likely want the loan with a low interest rate and fees, but you also need to ensure the loan has the features you need.
For most people a car loan should allow you to make extra repayments and payout your loan sooner without any penalties. It should also allow you to make weekly or fortnightly repayments if you wish.
Borrow Within Your Means
However you borrow the money for your first car, one of the most important factors is to not borrow more than you can afford, which could then lead to missed repayments.
A loan for your first car could be the first type of credit you receive. If you fall behind on repayments you could end up with a bad credit report, which will make life more difficult when you want to take out a home loan or other forms of credit.
Taking out a modest loan for your first car may be your introduction to the world of credit. By choosing your loan properly and borrowing an appropriate amount you can enjoy the independence of having your own car without suffering a major financial burden.