The Real Deal about First Time Car Buying

Buying your first car is exciting. Getting behind the wheel and breathing in that new car smell is as exhilarating as bunging jumping off the highest surface. Wait, before you sign your life away how are you going to pay for that new set of wheels? Did you choose dealer financing? Is someone co-signing for you? Did you get a fair interest rate? Did you even do the research on the car your looking for?

Put the pen down, don’t sign anything yet. Dealers can smell a newbie a mile away, and girls, not to be sexist, but bringing along the male muscle can add a lot of clout to your asking price.

Follow these few quick and easy steps to get yourself on the right track towards purchasing your first car.

1. Figure out your budget. There is no need to go rushing out looking for the hottest car on the market. Even if you’ve got a wad of cash burning a hole in your pocket, hold on, sit down, and crunch the numbers. You want to find a car within your budget, missing a payment can create bad credit. There are plenty of free online budget helpers, but sometimes the good old fashion pencil and paper will do just fine.

If you need a little help, check out this template from Help.com.

2. What type of car are you looking for? So you know your budget. Great, start surfing the web or cruising the local dealers to get a feel for what type of car you want and what the price range is, new or used. There are a ton of great sites online that are geared towards car buyers. Check out Kelly Blue Book or Edmunds.

3. Financing? Now, you’ve got your car, you’ve got your budget, it’s time to talk financing. As a first time car buyer it’s going to be hard to get a loan with a lower interest rate. Unless you have some amazing credit built up already there are some things you need to factor in.

A. Do you know your credit score? By law you are allowed to check your credit report for free once a year. Don’t pay attention to all those online sites that scream FREE CREDIT REPORT. The only legal site is Annual Credit Report. Learn More.

B. Start doing research on credit rates from local banks. Some large insurance companies offer financing. If you’re already with a major company ask your agent if they offer financing and if you’re available.

C. Prepare to be denied loans. Every time you apply for loan or a credit card your credit takes a hit. So if you’re serious about shopping around for the best rate, have a plan for who you want to apply to and do it all in one day. This shows that you are shopping around and doesn’t hit your credit as hard.

D. Be prepared to need a co-signer. You may be able to afford the monthly payments but the loaner doesn’t know if you’re reliable. So they may ask for a co-signer. Co-signers can lower your interest rate at the time of signing. However if it’s still too high, after making 6-12 months of solid payments, refinance and eliminate your co-signer. REMEMBER, a co-singer is held responsible if you CAN NOT make the monthly payments. This puts both of your credit scores at risk.

E. So, you’ve found an interest rate your happy with. Good, now you’ve got the preapproved loan in hand. Wait, you’re not preapproved? Well, get preapproved. A preapproved loan can help drive down a dealers price. Dealership financing is very competitive. They may be able to match or do better than the rate you were preapproved for.

F. Finally, you’ve found your car. You’ve got the dealer exactly where you want them. Hold out just a few more seconds, phew, okay, sign that paper! Baby, you’ve got a hot, well deserved, new set of wheels.