I think we all can agree that getting your first car loan can be a challenge. Most loans that you qualify for come with high interest rates due to your low credit rating and lack of credit history.
The Need For First Time Car Buyer Programs
Many people getting their first car financing loan will have no trouble paying back the loan because they are responsible and have steady income from their job. However, most money lenders or credit unions who offer low interest rates don’t look at that. They are more interested in your past credit history and your present credit score.
This seems unfair to a first-time car buyer who is trying to establish their first real secured credit account to build an excellent credit rating.
Many of the finance rates offered are lower than many of the first time car buyer programs that your local car dealer offers for a very simple reason.
Valley Auto Loans is a loan broker for many online financing lenders nationwide. They offer your financing opportunity to several lenders who will offer the best deal to you they can. Competing for your loan drives your interest rate down and give you the chance to choose the loan package you will feel comfortable with.
With dealer programs like Ford Credit you can qualify for the first time car buyers program if you meet their criteria and possibly qualify for a reasonable interest rate but you may be limited to the vehicles they offer. With our loan programs that fit first-time car loans and student car loans, you can choose the dealer you want, the car you want and the loan offer you are satisfied with.
There is no obligation to accept any loan offer, and there is no charge to you for the service Valley Auto Loans offers.
Picking Your Best Loan Offer
People are finding more ways to save money with the use of the internet. It provides listings of services for anything you need these days at the touch of a key.
Shopping for first-time auto loans are no different. By shopping online, you have the opportunity to review many first-time car loan offers for the best one. This is what makes Valley Auto Loans so valuable to you. Your one application is considered by many lenders, and after reviewing your basic information, they will offer you their best deal for your consideration.
Now that you are ready to start shopping for your first auto loan you may have some questions about car financing in general. We have listed some general finance information that any car buyers should think about before committing to their first auto loan.
Buying Your First Car With No Mistakes
Many people with bad credit will admit that their first car loan was not a good choice. Maybe their car loan was OK, but they should have been wiser with their financial decision making and paying down their debt.
For first-time car buyers starting out with no credit, it is not always easy to make the best choices. Typically, first-time car buyers do not know how to get the best interest rate if they have not established a credit history. Without a doubt, your first car loan is a huge decision, and you must take your time and consider all of the factors and options. With this in mind, here are nine things for first-time car buyers to consider when applying for auto loans, car shopping and the correct pricing for the car they choose.
You should know where you stand in regards to your credit score.
It is a scary process to run out, get a loan and buy a car if you are a first-time buyer. If you have subprime credit or are a first-time car buyer with no credit, you may not qualify for financing through a traditional bank. Most people at some point in their lives purchase a vehicle with bad credit or no credit and take the loan the dealer offers at the car lot without shopping for the car loan themselves.
Refinance that first car loan
The dealer may request that they use a co-signer to secure the loan. At that point, they think it is the easiest, quickest way to get a car that day and take it home. They completely trust the sales person with deciding their loan terms and payments. Dealers will sometimes use straw purchases tactics to scam you if you have no credit.
They pay the high payments without question, thinking that this is all they will qualify for, and that is exactly what the car salesperson is telling them. Then after the sparkle of the new car has dulled down they find out that they are paying a higher finance rate than they qualify for at other lending institutions. Some people will struggle to make the payments for the next few years until the car is paid off.
For first-time car financing, you should have no trouble getting a first-time car loan, even if you have less than stellar credit. While this is true, you must know you will pay a little higher monthly payment if you do not have a high credit score.
Of course, in the future, if you make payments on time and maintain a decent credit profile, you can always refinance your loan and drop those high payments while your credit rating improves. You do not have to wait until the loan term is completed to get better monthly rates.
Your Credit Score
Before getting started, you should know where you stand in regards to your credit score and how low can my credit score be to get a car loan? Now, if you are a first-time car buyer with no credit, you can raise your score by paying off debt and resolving issues. You can also take the best loan you can find and use it to build credit.
On the other hand, if you have severe financial problems, you should consider holding off on applying for your first car loan until you can fix your underlying issues.
Your FICO Automotive Credit Score
Auto lenders and car dealers look at what is known as a FICO automotive credit score. This credit score is not the same as your standard credit score because it looks at any credit history you may have with past auto loans.
Being a first-time borrower and not having any credit history, the credit bureau will look to any records of paying other types of debt you may have paid on regularly like rent or electric bills.
Your score will be established from this information if it is available to them. This is good news if you are paying your bills on time, this new process would give you a higher credit score than in the past.
When you are applying for your first auto loan, you should have your financial information on hand.
By not leaving any of the application fields blank, you can get the most accurate loan rate. To prepare for this, you should get out your pay stubs, vehicle information, job history, contact details and any other financial data that the lender will need. That way, when you fill out the paperwork or speak to a finance agent, you can have confidence that you will get a great rate.
Also, you will not have to deal with any lengthy delays when the lender asks for more information. This is where applying on-line can be helpful. You can fill out the application with no pressure from salespeople.
Take your time to find all the correct information, so your application is the most complete and accurate that it can be. You will also go to the dealer with the money in hand, so it will be easier to negotiate with the dealer for a final price.
How Much Should A First Time Car Buyer Spend?
For your first car purchase, you should get pre-approved for a loan that fits your personal spending budget.
Car buyers can get distracted when you see all the available cars for sale. It is easy to fall in love with a new $50,000 car that is outside of your spending range. The sales person is all too eager to tell you he can stretch out the payments for you, and this is how many get caught in a bad credit trap with their first car purchase.
Dealers will also take advantage of first-time car buyers by selling you extras you do not need or adding additional fees you should not have to pay. If you are buying your first car and want a simple car with an affordable loan, do your research. You should consider a compact or other simplistic car offering reliability and safety at a reasonable price.
With this, you will also have enough money to make your payments without a struggle.
Remember, there is nothing wrong with a beautiful new car, but you must understand that it comes at a significant cost, and you should consider keeping your first purchase simple and not over-the-top. When you are a first-time car buyer, the loan, and the credit you build will be as important as the car you choose to drive.
Length of your first auto loan
For your first car loan, you should think about the long-term when pondering your vehicle purchase. For example, when you want to buy a car and keep it for a decade, you can probably get a loan for six years without much aggravation or worry.
Trading in a car you still owe money on comes at an enormous long-term cost and will likely hurt your financial future.
The monthly payment should not be the most important thing to consider. A good car deal starts with the overall price. However, the reality is, you should get a monthly payment that you can truly afford.
Now, most people do not know what this means. To understand this further, you should look at your budget and come up with a plan to make your monthly payments more affordable.
Budgeting For Your First Car Loan Payment
You should plan to put down 20% of the sticker price for a down payment.
Your car payments should not exceed 15 % of your gross monthly pay or 20% of your take home money.
Your car loan term should be kept to 48 months or less.
One example would be if you had a gross monthly income of $5,000, your monthly payment should be $750.00 or less. Now apply that to a 48-month loan term at 6% interest, and you will be able to finance a car loan for about $32,000. If you use a 20% down payment ($6,500), you will have a budget for a car that cost about $38,500.
If you do not have a budget, you should start with a simple budget first. At the same time, when coming up with a monthly payment, you think you can afford, remember to think about intangibles of your financial life such as missing work or running into other short-term problems.
We highly suggest using an auto loan payment calculator to help you preview what your payments could be with different sized down payments and different loan terms. Then you will have a good estimate of what you can afford.
Look at the Cost Of Ownership
It is easy for your first car loan decision to be based on monthly payments. While this is the biggest cost of car ownership, it is far from being the only thing to remember. You must understand that car ownership is costly. For starters, other than a monthly payment, you will have insurance, fuel, and taxes.
On top of that, you may have to pay for periodic mechanical repairs and maintenance. You should have an understanding if you can truly afford the monthly payments plus the other expenses.
If not, you may want to tone down your purchase. Our resource page has helpful tips for doing some of the maintenance yourself like changing wiper blades or plugging a leaking tire.
How Can I Get Cheaper Auto Insurance?
People buying a car for the first time or who have signed on for a high risk auto loan often try to think of other ways to reduce their spending. Often, one way that comes to mind is to reduce their insurance payments.
This may mean not getting full coverage auto insurance. One way to compensate for this problem is to select the right type of car. One way insurance companies decide how much to charge a person for auto insurance is the kind of car they have.
Your first car should be a wise choice. The car you choose will help you establish credit and provide transportation to school or a job. It should work to improve your future lifestyle. It should not be a fashion statement that will cause financial disaster and make you work just to make the car or insurance payments.
The Price of Car Insurance for a First Time Car Buyer
Where the car is parked at night can also raise interest rates. If it is parked on a street where it could easily be stolen, the insurance rate will go up. If it is regularly parked in a garage or even in a driveway, the price is reduced.
Adding security devices to the car is another way to reduce the insurance. A GPS tracking device will help the authorities find the car if it is stolen. An alarm system that will deter auto theft is another accepted security device. Automatic seat belts, airbags, daytime running lights and anti-lock brakes can all contribute to car insurance savings.
Avoid moving violations and accidents. In many cases, the people who have a good driving record get lower cost insurance.
Only buy the coverage you need. If your car is old, it may not be worth paying for a policy that cost more than the value of the car. You should also check if you have roadside assistance through your credit card or the AAA. If so, don’t buy roadside assistance through your insurance policy.
Increase the deductible. This means you pay more at the time of an accident before the insurance company starts to pay. This is one of the best ways to reduce the cost of insurance, but you must be sure to keep the amount of your deductible somewhere safe and not touch it for any reason. Then, you’ll have it when it is needed.
The lowest quote for auto insurance is not always the best option. This is why a comparison is crucial. Not only should the price be compared, but the coverage also needs to be examined. The low price from one company may not give enough coverage. The opposite can also be true. A high cost may also not provide the right coverage. Before doing the research, consumers need to decide what kind of coverage they require.
If the consumer already has other insurance policies, it is often beneficial to get auto insurance from the same provider. For one thing, insurance companies often reduce their rates for customers who have been with them for years. Another possibility is to bundle the auto insurance in with the other insurance policies. This can only be done if all of the insurance policies are with the same carrier.
Even if you have policies from other companies, it is a good idea to compare prices for a joint policy from several insurance companies. This may mean losing any advantage you had for being a long-term customer, but, sometimes, it might be worth the switch. You will not know unless you ask.
First time car buyers have a history of paying the highest car insurance. Remember, insurance companies are in competition with each other and usually give discounts for various reasons. In some cases, if you do not ask, you do not get, so there’s no harm in asking if any discounts are available. You may qualify for a low-mileage discount. If you reduce the amount of miles you drive by carpooling or taking public transportation some of the time, most insurance companies offer discounts for this. Some of the most common deductions are for:
Teenagers who have taken a defensive driving course
Students on their parents policy
Students away at college who do not take their car
You have learned several ways to reduce your auto insurance rate. Start with buying a car model that insurers consider less risk, combine your auto insurance with any other insurance policy you have and, the most important thing you can do, compare, compare, compare.
Down payment for your first car loan
Ideally, when buying a new or used car, you should offer a sizable down payment or as close to 20% as you can. Now, there is no set rule on how much you should put down with most of our auto loan lenders. Some will even give you a car loan with 0 down. However, if you can write a check for a couple of thousand dollars, you are likely to get the vehicle you want and a loan with lower monthly payments with little effort.
Be Wary of the Car Dealer
Often, a car dealer can spot first-time car buyers. They will try to get you to sign up for a loan using their in-house dealer financing programs. This is not usually helpful for you as most car dealerships do not offer great loan rates and require large down payments. This is also true with people using a first-time car buyer program from new car dealerships.
The salesperson makes a commission off of the expensive loans they offered you, and that is their incentive. They are not just providing you a loan because they are trying to save you money.
Many salespeople will try to pressure you to fill out a loan application to make the sale of the car. It is necessary for a first-time car buyer to know how to shop for a car and deal with car dealers.
All dealers will try to get you to use their lenders for your financing
Instead, you should have a pre-approval in hand from a third-party loan company that provides great deals for first-time buyers. When doing this, you will get the best rate on your loan.
Valley Auto Loans uses lenders who work with first-time car buyers all the time. That is their business. They will compete for the best rate for you.
Many low-income families make up a significant portion of people financing a car for the first time. Many of our lenders offer programs for low-income auto loans to applicants who make a gross monthly income of $1,500 or more.
If you have not yet established a credit history, and this is your first-time car buyer loan for a new or used vehicle, you should have no problem getting a loan. While it is not always a fun process, you can land the car or your dreams if you consider your options and look for a good deal on your vehicle loan.
If you do not do this, you are likely to overpay or end up in financial trouble. Luckily, with the right amount of research and devotion, you will find a loan that suits your unique financial situation.
To begin the process, start your application today with Valley Auto Loans! There is no cost for applying and no obligation. You can look over what you qualify for and go car shopping. You are only a first-time car buyer once, so your experience should be memorable in a good way.