Mistakes to Avoid the First Time you Buy a Car
Mistakes to Avoid the First Time you Buy a Car
Posted on October 13, 2021
We all remember the first car we bought. The 2nd or 3rd hand car that we drove while in high school. While it is fun to remember to “good old days”, if this is the first time you buy a car on your own there are some key steps you must follow to make a fully informed decision.
Our Georgetown auto loans team shares their many years of experience to help any new car buyer make informed decisions.
What is your budget?
Everyone wants to drive a new car, but have you seriously thought about what you can afford? For the majority of us out there, we cannot buy a car with a lump sum of cash we saved so the only option is getting a Georgetown car loan.
Working on the premise that this is the first time you buy a car, you do not have an established track record of paying a car loan. Having good credit will help reduce the total amount of interest you pay on the auto loan which gives you the ability to qualify for a higher loan.
What is your current credit score?
You can access your credit score via the web or apps and get your current credit score. Don’t get stressed if your score is not very high, most young people have student loans and other debts that weigh down their credit score.
If your credit score is at least 650, you should be able to qualify for an auto loan with reasonable interest rates but ideally, you should aim for 680 or higher.
There are some steps you can take to improve your credit score but it will take time for these steps to have the desired impact.
One of the simplest ways to improve your credit score is by paying your bills on time. This sounds simple and it is all that you need to do if you want your credit score to move higher.
Debt load
Lenders want to know if you are carrying too much debt, you may have just started working a new job and wanted to gift yourself a new car. The lenders use a debt to income (DTI) ratio to figure out whether you can handle any more debt.
Most lenders will not lend if your DTI ratio is over 35% which factors in the proposed car loan. The only way you can fix this is by earning more money or paying down your current debts.
It will take time to pay down your debts and earn additional income so there are no quick fixes.
Getting help from mom and dad
A great way to increase your odds of buying a new car with competitive terms is to ask your parents to cosign the loan. Your parents should have good credit and income that will make qualifying for a competitive Georgetown auto loan easy.
As cosigners, your parents would have to repay the loan if you were to default so you will need to have a serious conversation with your folks.
Car prices are on the rise, so if you can make the monthly payments you should think about buying a car now before prices go even higher. Having a new car will make you feel amazing, but you will need to start doing your legwork to get the wheels in motion.
When you’re ready for a car lease or loan, get in touch with the Georgetown auto loan experts at Northway Ford for great deals on auto finance.
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