Whether you’re dreaming of owning a Corvette or Corolla, your own first car is big moment for any American.
Cars haves become one of the key parts of US culture – the vehicle you own is as much a part of an American’s identity as the clothes they wear or their hairstyle.
Car ownership may be a big part of life – but it can also be a major financial trap for the unwary. Buying a car is usually the biggest financial commitment of your life, after buying a house.
There are so many intricacies, from long-term leasing packages to no-hidden-fee tire finance. Which is right for you?
Some young buyers’ first thought might be to only buy a car that they can afford with what they already have in a bank account. But then we all see other motorists driving around in cars that seem way out of their price range.
They seem to buy appealing cars on plans, loans, or long-term deals. Is this really the best way to buy a car?
Well, yes, it can be. Today, there are ways to buy a car without waiting years while you save up the asking price.
In short, what you can do is own and enjoy the car WHILE you are saving for it. You pay for the car as you are owning it.
This means buying the car on a finance package. It will generally involve making an initial deposit and signing up to make regular payments over a fixed period.
The dangers of car finance
It all seems so easy there is a danger in the finance process though. Take care not to over-commit.
Don’t sign up to make payments that you will struggle to meet every month. The shiny new monster truck on the forecourt may look great now but will you still be able to make those monthly payments next Christmas, or the summer after that?
Maybe it’s not worth worrying about losing your job or getting sick – but can you predict all the other expenses that you will have over the next few years?
Think about the ways that your home or family could suddenly need an extra chunk of your money.
The importance of credit score
Your income, your status and your credit score may all be taken into account by finance negotiators. These factors may determine how much you can borrow, for how long and at what interest rate.
Did you know you can get a free copy of your credit report from one of the major online credit reporting bureaus? It’s worth checking your rating isn’t falsely skewed by an error in their reports – before you go along to try to buy your car.
How much deposit is best?
Dealers ask for different percentage down payments. The keener they are for your business, the lower the deposit they want.
So be wary if there’s a tiny deposit or none at all. Is the deal a bit too good to be true?
It’s best to put down as much as you can of course. Making a solid deposit of, say, ten to 20 per cent will reduce the balance you have to pay.
That balance is subject to interest. Reducing it now means you pay less overall.
But don’t spend every cent you have. There’s insurance, tax, extras and fuel to think about too.
And new cars do have a habit of developing faults. They will probably be covered by your warranty. Probably.
Keep a few dollars in a contingency fund for unexpected costs.
There sometimes seem like lots of hurdles to jump when getting finance for a car. But don’t stress.
Millions of young Americans go through the process every year to get their first wheels.
We guarantee that as soon as you’re driving away from the lot in your first car you’ll forget the worries of setting up a finance deal as there is no better feeling. The best thing to remember is that as long as you go in prepared and know exactly what you want then it should go smoothly. Don’t over-reach and remember to always think about the future.