Financing Made Easy For First Time Car Buyers
Every year thousands of people buy their first car and are confused about how to go about it, with some ending up with poor choices because they had no clarity regarding the purchase of their first car. A car, whether new or used is an important decision and requires a certain amount of research and information before finally paying it and taking it home. The steps in between are what determine whether the best figures and bargain is possible or not.
Previously we discussed ten crucial tips for first time buyers, but another important aspect of buying a car for the first time is financing and the related options. Most times, purchasing a car, old or new requires some financing as not everyone can afford to pay it all by cash or pay it by themselves in one go and hence, this is a legitimate worry of a lot of people.
It is usually advisable to purchase a car with an understanding and affordability that the total payoff will happen in 48 months. Anything more than that may be troublesome in some cases. Also, in quite a lot of cases, the lending party may not approve a loan for a used car that is older than five years old.
In this, let’s talk about some financing tips that will help take better-informed decisions while buying the first car or otherwise.
- Credit History
For most of the first time buyers, there isn’t an established credit history. But banks take into account the credit history before approving a loan, as the credit history allows them to understand whether a person has an established record of paying bills on time.
The Credit history is also used to determine a lot of factors like time period, EMIs, etc., so it is an important tool in any of your financing endeavor. The first step would entail finding out the credit score or the lack of it and working on improving it. A usual method for improving the credit score/rating is to get a credit card. But the score will only improve if you continue to make payments at the proper time. Credit card marks the starting of credit rating for most people.
- Downpayment and Expenses
Even if you have plans to get financing for your car, the down payment is a necessity and needs to be paid when availing the loan. The higher the loan, the higher will be the downpayment too, so keep in mind what car you want to buy. The more expensive car will lead to the higher loan amount and down payment. Remember to account for your income and plan according to how you’ll be able to pay.
- Loan Period Length
According to the current market standards right now, the average duration of an auto loan is around five to six years, though longer financing periods have grown with consistency. Increasing the time period may decrease the EMI but the total amount paid will be more. The shorter the loan time period chosen, the lesser amount to pay over the actual price. There are some special zero interest loans available too, but they are available for a shorter time period.
- Verify the Costs Involved
It is an important thing to check all the additional costs associated with the buying of the vehicle. Buying a car is not a one-time deal, and you need to pay for important factors like insurance, maintenance, repair and fuel costs. Having a rough estimate of this figure will help you divide your expenses and plan in advance.
Insurance for example usually is more expensive for youngsters. In fact, the insurance rates for two doors cars are higher than four door cars as the sportier the car, the more the premium.
Insurance is critical and can’t be neglected, and it is illegal not to get insurance. Insurance also depends on where a person lives and how much the person will be commuting annually. You can check out our list of insurance providers in Dubai(UAE).
- Check Multiple Options to Reach the Best Figure for Self
It is better to check for various options while preparing to buy a car. There are a lot of lending companies and banks, and you can approach more than one to get the necessary information in your quest to choose the best finance option that can fit your budget well. Also, try to haggle with the salesman since they can help you get a good deal, but they won’t tell you about the discounts unless you explicitly ask the person.
Important Points To Remember About Getting Financing
- If you can’t get the loan approved because of credit history, try asking someone from the family, usually parents to cosign the loan. This will help bypass credit history, but as a cosignatory, the loan is in their name as well. If there is a default in payment from the primary signatory because of no payment, then the cosignatory is deemed responsible for making payments so be transparent about this process.
- Make sure to verify the signatures before submitting the application, as some car dealers try to put the person with higher credit rating as the primary signatory to increase the possibility of the loan being approved. But this will come as a result of your name being removed from the documents.
- You can get your loan refinanced to decrease the loan’s rate of interest and save money.
With financing understood at the most basic levels, it will be much easier to get your first car at the best deal for yourself.