Whether you’re buying a first car for a teen or helping them buy for themselves, it’s important to determine a budget before you begin shopping. Otherwise, the sheer enormity of choices in a wide range of price points could be overwhelming, and you might end up spending more than you can afford.
The first step is figuring out how large a down payment you will be able to make.
The first step is figuring out how large a down payment you will be able to make. This will help you determine the size of loan you are wiling to take on. According to experts such as Consumer Reports, it is best to spend no more than 36% of your gross monthly income on debt. So add up other debts from credit cards and loans to see how much additional debt you can safely acquire.
Next, take a look at current interest rates and then go online and find a free car loan calculator to figure out your monthly payments.
When shopping for a bank to finance your car purchase, keep in mind that you will likely need to co-sign with a teen buyer or apply for the loan yourself. Either way, knowing your credit score will help you be prepared when talking to lenders. If you’re shopping for a college student, you can search for a program designed for students or high school grads that have less stringent credit requirements and may even offer special rebates.
When shopping for a bank to finance your car purchase, keep in mind that you will likely need to co-sign with a teen buyer or apply for the loan yourself.
Remember that the total price of the car will be higher than the sticker price and will include things like tax and registration. An extended warranty may also be worth figuring into your budget and will likely pay off in the long run. Finally, take into account other expenses such as gasoline, maintenance and insurance. Add these to your loan payment amount to determine how much additional monthly expense you can comfortably take on.
An effective way to stretch your budget when buying a car for a young driver is to buy used. Remember that a new car loses almost half its value in the first five years. A newer pre-owned car will still have up-to-date safety features, yet will likely still have an active warranty and many years of usefulness. A reputable used car dealership will thoroughly inspect and recondition each vehicle and will offer a warranty, so don’t be afraid to ask for these things.