Buying your first car is always a very exciting time. However, it can also be extremely challenging if you do not have an established credit record. You need to keep in mind that is it preferable to have no credit instead of bad credit and that your first goal should be to establish a credit record that will enable you to get financing for your first car. Ideally you should shop around and compare the different financing options that are available even before you start looking at the cars that you could be whizzing around. If you have lined up your finance even before you buy your vehicle you are in a position of strength that will enable you to negotiate a better deal at the car dealership.
Financing Options at the Car Dealership
Among the various things that car dealerships offer to encourage customers to buy vehicles is a single-window car finance option at the dealership itself. Typically this is done through in-house finance companies that the manufacturers establish to lock in the customer. Even before comparing the various models of the cars, you could start a dialogue with the financing department to find out what options are available to you. Typically, higher interest is applicable to customers with no credit when compared to those with who have an established credit record. Since you will need to pay a higher monthly installment if the interest rate is high, you should look around carefully to locate the lowest available interest rate.
You need to be more careful in comparing the costs if the dealer offers more than one car loans before you make up your mind. To encourage customers to finalize their deals, most car dealerships offer a single window for buying as well as financing the car. However, the convenience usually comes with a higher cost in the form of higher rates of interest. It is best that you do not let convenience, or for that matter desperation, force you to make your selection at the car dealer. Instead you should take time to do some research on the prevailing market conditions and save yourself some very good money.
Other Financing Options
If the car dealership cannot make available any finance or if the plans do not suit you, you can always take recourse to other modes of financing. For example, it may be possible for you to explore the opportunity of asking a family member with a good credit record to co-sign the loan for the car. However, you should bear in mind that in case you default and cannot make the monthly payments, your cosigner will be responsible for making the due payment. This could put your relationship under great strain. However, if your ability to make the payments on time is good and you have a good relationship with your cosigner, this is a very good way of acquiring your first car and simultaneously building up your credit history.
If you do not want to go the consigner route but have substantial savings, you could consider making a large down payment. This may help you considerably in qualifying for finance, as customers who have a large stake are preferred by the finance companies as there is less risk of your defaulting on the loan. Even if you don’t have too much cash, you could think of taking a loan from family, relative or friends so that you can make the down payment and still avoid exposing them to the financial risk of the cosigner route.
Things to Keep In Mind
Car salesmen can be really persuasive and can come on to you really strong in the hope of making the sales kill. If you don’t want to be pressured by salesmen, it can be a very good idea to compare both interest rates, and car models on the Internet at your own pace. As a first time buyer, it may be quite tempting to consider the maximum possible tenor so that the monthly installment can be lowered to the maximum. However, you should realize that the longer the tenor, the more interest you will be paying over the life of the loan. The longer the loan duration, the risk of default also get higher too. It could be worthwhile postponing your purchase till such time you can afford to take a loan for a shorter period. You should also take care to have your loan approved before you decide on the car model as this will help you to stay within your limits and not go overboard with a purchase that will break your bank and your back.
Author bio: Martin Purcell is the owner of one of the largest online dealerships of certified pre-owned cars. A prolific writer, he writes regularly in the online media regarding the best ways of purchasing cars.