There may not be many things more quintessentially American than the allure of the open road, and the freedom represented by having your own car. For every teenager who’s grown to loathe the school bus or being dropped off by mom or dad, it represents all the freedom they aspire to, and if you’re considering your first auto loan, it might be closer to your reach than you realize.
Arbor Financial and the Volt account are working to make it as easy as possible to help our younger members finance their first car, and we want to be here for you every step of the way. So with that in mind, let us present our tips to finance your first car.
1. Make sure your house is in order before you think about a car
Of course, we mean your financial house. As a younger borrower, you won’t have as much credit history, which means that you may not qualify for the lowest available rates. But if you’ve taken the time to build up a credit history—for instance with a credit card available to Volt members starting at age 16—then that can also help you in receiving the best possible rate for your financing. Contact a lending specialist at Arbor Financial to discuss your best available rates.
2. Save Up Your Down Payment
It’s simple: the more you can save for a down payment now, the lower your monthly payment will be. Many lenders recommended that you have at least 20 percent down, but we can help you out even if you don’t. But it’s definitely true that having at least 20 percent down will be a huge help in both keeping payments low, and ensuring that you can afford a shorter term for your auto loan. The shorter the term, the less you wind up paying back in interest, and the more you wind up saving over the length of the loan. That would mean at least $200 saved for every $1,000 of purchase price.
3. What’s Your Budget?
Once you know your down payment, you can start thinking about how much car you can actually afford. One easy way to do this is to start with your monthly payment. What can you afford? Then work backwards from there, knowing what you’ll have saved for a down payment, approximately what your interest rate might be, and so on. A lending specialist from Arbor Financial will be happy to discuss a comfortable term, payment and loan amount with you. And once you get to the dealership, stick to that all-in budget. Don’t get hooked into situations like telling a salesperson a monthly payment target. There are ways that they can manipulate other factors in the loan (such as duration), which could mean your car might wind up being a lot more expensive than you thought. And speaking of budgets, you should be careful to take into account the cost of insurance and normal maintenance. If you’re buying a used car, then the odds that you might wind up with some repair bills increases. Luckily, Arbor has ways to mitigate that with some of our extended warranty options.
4. Consider Adding a Co-Signer
With your first auto loan, it’s possible that having a credit card for a year or two might not allow you to build a significant enough credit history to make a dent in those interest rates. So, one option to consider is having a parent co-sign the loan with you. This will help you not only get the loan now, but also to build your own credit making things like co-signers unnecessary in the future. You’ll have your own credit history to rely on!
With these tips, we’re confident that you’ll have a good experience shopping for your first car, and more importantly, paying it off. At Arbor Financial, we have great rates, competitive with anyone in the area, and a knowledgeable staff ready to help you make the decision that’s right for you and right for your budget.