Tips for Financing Your First Car
Searching for car dealers who will finance a vehicle can make first-time buyers feel like real grown-ups. Financing an automobile may seem like a confusing process, but it’s actually quite straightforward and easy to do.
There are two types of financing options that buyers should understand: direct lending and dealership financing. Through both options, drivers agree to pay a specific amount of money over a specified period of time, plus a finance charge. With direct lending, buyers have the opportunity to work directly with financial institutions to negotiate loan terms. Through dealership financing, on the other hand, the finance officers at the car dealers work with the bank or financial institutions to negotiate loan terms. This is often the most convenient way to finance a ride, since car dealerships typically do most of the work.
The buyer should compare the offers to determine the best loan terms for their financial situation. The loan terms will depend on several factors, including the buyer’s credit history, the vehicle’s price, and the length of the contract. It goes without saying that it’s always a bad idea to agree to pay more than one can actually afford. To calculate what amount they can afford to pay, buyers should take into account their monthly income, living expenses, and debt obligations to determine if they have enough money left over each month to make a car payment.
If the buyer has determined that he can afford to meet the loan terms, then he should be prepared to provide the following information:
-Full name and date of birth
-Social Security number (SSN)
-Address, previous addresses, and duration at residence
-Occupation and employment history
-Total monthly gross income and sources
-Current credit accounts and debt obligations.
The lender will obtain a copy of the buyer’s credit report and use that information to determine whether to take the risk of loaning the money to the buyer. Buyers with poor credit or a limited credit history may need a cosigner before the loan is approved. It’s then up to the lender to decide whether or not to approve the loan and, if so, on what terms. When it comes time to sign the contract, it’s worth asking to make sure that all the rates have been finalized. Even when car dealers are willing to let you take the vehicle, it may be better for you to wait until all the terms are finalized.