Financing guide for first time buyers 

A car is a big investment and there is a lot of information out there. Information not just regarding the different types of vehicles, makes, models, brands, years, etc., but then there is the style, design, overall look and feel, and all the accessories. On top of that, you have different performance ratings, power ratings, and safety ratings to review.

For many first-time car buyers, the research on the different cars and all the gizmos and gadgets that are included is the fun part. They enjoy doing the research and performing the test drives. The main questions and concerns tend to revolve around the financing bit.

Buying a car for the first time is a big deal. 

At Sun Chevrolet, we understand that purchasing a vehicle is an investment, and it’s a big life milestone. We’ve been in this business for a lot of years, so we’ve put together a financing guide for first-time car buyers with five main points that we hope are helpful:

Know Your Budget

Unless you are in a situation where you have tens of thousands of dollars just lying around, odds are you are going to purchase a vehicle through a loan. Car loans are legal agreements that set monthly payment over a specific period of time and there is an interest rate percentage attached.

A car loan is a lot less than a house loan, but it is still a significant amount of money that needs to be planned for over multiple years. Car loans vary greatly in amount based on the type of vehicle you purchase, so it’s important to understand your personal financial situation before you commit.

Sites like Credit Karma show that the average car loan equals a monthly payment of around $650 for a new vehicle and $490 for a used vehicle. On average, lease contracts on vehicle loans are anywhere from 36 months/three years all the way to 72 months/six years. Interests vary just as much depending on a person’s credit score and can range from 2.5% all the way past 15% and that adds hundreds of dollars each year on top of the original loan payment.

In addition, owning a vehicle means you also need to budget for things like gas, ongoing repairs and maintenance, parts, and auto insurance coverage.

Taking on a car loan is taking on a debt, so there are significant penalties for not paying your car loan payment in a timely fashion.

Explore Finance Options

Since most first-time car buyers need a car loan to purchase their vehicle, exploring your finance options is also important. Auto dealerships will have a wide range of options to discuss, but there are other institutions that support car loans. Banks are a great choice for many first-time car buyers and having options allows you to truly make the best decision.

Having options also means you are adding a bit of competition, so odds are you will even see lower interest rates heading your way in an attempt to attract your commitment.

Credit Scores Are Important

We mentioned above that credit scores are actually a huge factor in determining a person’s interest rate, but your credit score is also a factor in getting approved for a car loan in the first place. Regardless if you get a car loan through an auto dealership or a bank you are asking someone for money that you are then paying back. People need to trust that you are, in fact, good for the money and a bad credit score does not give off a lot of confidence in that regard.

When you express interest in applying for a car loan, one of the first things you will do is submit a car loan application of interest, and your social security number is required. Your credit score will be checked and reviewed immediately as a part of this process.

If you have a low credit score, you might want to think through how to boost your score before applying for a car loan.

Have a Solid Down Payment

A down payment is an amount of cash money that is given upfront to pay off an immediate portion of a vehicle. The more money paid with a down payment, the less money is owed overall and the less a car loan needs to be. A 20% down payment on a new vehicle is typical if you can afford it.

New vs. Pre-Owned

Even though you might really want that new car, it might not be in the cards for your first-time vehicle purchase and that’s ok. Buying a pre-owned vehicle is more affordable, and it’s a great way to get more familiar with the car buying process. It’s also great for your credit if you pay your loan properly and the next time around you might be able to upgrade.

Remember, You’re Not Alone!

At Sun Chevrolet we pride ourselves in being able to support return and first-time buyers alike. Our finance team is standing by to answer any questions or concerns a new buyer might have at any point in the car buying process. Give us a call, stop by the showroom to meet with one of our finance representatives one-on-one, or fill out one of our contact forms online.

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