Buying a new car can be a very exciting experience, but there are a few things you must consider to prepare for the responsibility you are taking on. Here is a list of factors to consider when looking for a new vehicle:
- New VS. Used
- Auto Insurance
New VS. Used
Even though driving a car right off the lot with zero miles and that amazing new car smell is thrilling, a used vehicle that has time left on the factory warranty can be just as reliable and more affordable for a student than a new car. New cars have the appeal of never having a previous owner and can have all the features and new technology available with a warranty in case something were to happen. They can also be very expensive with a higher payment and cost more to insure. If you opt for a used car, it may not have every feature that you want, but it will cost less to insure, you might not have a car payment, and they can hold their value longer.
When looking at possible cars you may want to purchase, consider how much the monthly payment will be with insurance. It is illegal to drive without auto insurance so this factor should also be included in your estimated monthly payment. It may be nice to own your dream car but owning sports models and SUV’s often cost more. Economy cars are often the most reasonable choice for students living on a limited budget. With that being said, used cars are also a great option. Buying used cars give students a bigger selection of vehicles to choose from without exceeding a reasonable monthly payment.
Payment for Purchasing a Car
Although it would be nice to have the money up-front, students often take out a loan to help manage their car payments. If you find yourself in this situation, make sure you look into multiple lenders before making your final decision. The internet is a great place to search lenders and compare rates of interest. Be sure to note if the lender requires a co-signer or a guarantor, more often than not that can just be a parent or legal guardian who is of age. Some lenders may provide lower rates of interest if you are able to obtain a co-signer. The interest rate, terms and conditions and the repayment amount are the three main factors to negotiate with each potential lender. It may vary lender to lender but the details of your loan are often directly related to your FICO score, also known as your credit score.
A major issue students run into is improper financial planning. Before getting a loan, make sure you prepare for your repayment plan. It is important that you figure out how many installments you can afford to pay and at what value those installments can be. If you are forced to pay late on your payments or you default on your repayment plan, your credit history will be damaged and your FICO score will lower. By planning ahead, you can make regular payments that can help increase your FICO score.
By preparing for your loan before contacting a credit facility, you will increase your chances of approval because you will appear to be more reliable. As always, make sure you do your homework before agreeing to a financial contract!
Buying a new car, or even your first car, is very exciting. Be sure to do your homework and your research when deciding which vehicle is best for you.