First Time Buyer Auto Loans
Can I get a vehicle financed if I don't have any credit?
Have you recently graduated from High School or College? Have you recently migrated to the United States from a different country? Have you just started your first REAL job and are looking forward to supporting yourself and being on your own? If so, then it's time for you to start building credit. One of the best ways to build quality credit quickly is by buying a new car.
Buying a car for the first time is a very exciting experience. But it can also be frustrating and confusing if you have not done your research and gathered good information first. People with no credit and those with bad credit are in the same situation. For lenders they are a credit risk. First time buyers typically don't have any credit history (or very little). This is one of the biggest hurdles you will face in getting a loan. However, there are lenders ready to give you the opportunity to prove your creditworthiness.
Here are a few pointers before you get started:
Be realistic. Choose a vehicle that you can make at least a 10%- 20% down payment on. If you can't afford that much money down, then choose a different, less expensive car. Fancier, sportier cars with more features and options will come later, once you have established a solid credit history.
A car costs more than the monthly payment. You also have to pay for the gas, insurance, maintenance, tag and taxes. Be sure to take those costs into consideration when calculating how much car you can afford.
There's nothing wrong with buying a used car. Concentrate on low-mileage, late-model vehicles with high reliability and safety ratings. Try to find used cars that still have some factory warranty remaining, or factor purchasing an extended warranty into your costs. Imports are best when trying to get a loan (Honda, Toyota, Nissan). Most First Time Buyer Auto Loan Programs will not finance cars more than 5 years old or with more than 90,000 miles.
There is no return policy for cars. You can't give it back because you don't like it (well, actually you can, but it's considered a repossession, will severely damage your credit, and you will not be able to get an auto loan again for a very long time). Research in advance, know your options and make a solid decision before you sign the paperwork and drive away with your new or used vehicle.
Having a co-signer is a very good thing. Asking a relative or a close friend to co-sign with you is a great idea. It can make getting financing easier, and can save you a lot of money in interest over the life of the auto loan. A co-signer will sign the auto loan papers along with you. The co-signer will also be responsible for payments on your auto loan if you default.
Don't Finance More Than You Can Handle. One of the most important things to remember is to get a monthly loan payment that you will be able to afford now and later.
Don't max out the entire loan amount that you qualify for. Qualifying for lower auto loan rates is easier if you apply for lower loan amounts because there is less risk to the lender.
DO NOT go car-shopping by yourself. Experienced car salespeople recognize first time buyers, and many will try to take advantage of you. This is even more the case if you are female. Get an older relative (father, grandfather, uncle or brother) or trusted, knowledgeable friend to accompany you. Men tend to command more respect in car dealerships, and even more so if they are older. This not a sexist statement, it is simply the truth. Having an experienced car buyer with you will prevent you from being subjected to tricks or pressure tactics.
Keep your emotions in check. Buying a car can be a very emotional experience, especially for a first time buyer. Think with your head and not your heart. Pay more attention to facts and figures than colors, bells and whistles. Emotional buyers are easily taken advantage of, and generally overpay for vehicles.
What to Expect: A Typical First Time Auto Buyer Loan
Most First-Time Auto Buyer Loan programs are designed for the auto buyer who may have difficulty obtaining a loan because of limited or no credit history. These loans fund the purchase of a vehicle with manageable terms and at a competitive rate while also providing the opportunity to establish positive credit history. Below are the terms and conditions of a typical First Time Auto Buyer Loan:
Loan amounts up to $15,000 for individuals / up to $20,000 with a qualified joint borrower.
Terms up to 60 months (a few lenders will go 72 months for certain vehicles).
New Auto Loans up to 100% of manufacturer's suggested retail selling price (MSRP) plus sales tax, tag and warranty.
Used Auto Loans up to 100% of Kelley Blue Book retail value plus sales tax, tag and warranty.
Must be at least 18 years old.
Must be a licensed driver.
Minimum down payment of 10% of purchase price is normal.
Payment not to exceed 18%-20% of monthly gross income.
Minimum 12 months employment with present employer is normal.
No credit required, however, some programs do not allow any derogatory credit.
Proof of age and eligibility to drive (Drivers License).
Proof of automobile insurance.
Proof of Income and Employment.
Proof of Residence.
Proof of Phone.
References (usually 3-10).
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