Best Type of Car Loan for First Time Buyers
Sometimes it's harder to get a car loan than a home mortgage!
If you stop paying your mortgage, the lender knows where the house is and can easily repossess it. On the contrary, it's easy to hide a car from a creditor.
While it can be difficult to get financing, it's not impossible. Let's take a look at the car financing options for first-time buyers:
Get a Co-Signer
The easiest way for a first time buyer to get a car loan is to get a co-signer. This is someone who is willing to sign off on the loan and is liable for the car payments if you can't make them.
A co-signer is usually a parent or relative who has an established credit history. Getting a co-signer is a great way to build up your credit, but make absolutely sure you can pay off the loan before you do this.
The co-signer is responsible for paying off the loan and their credit could be ruined if you stop making payments. (See: Things to Consider Before You Co-Sign a Car Loan)
First Time Buyer Programs
Several car manufacturers offer special finance programs for first time buyers. Ford in particular has a good program that provides loans to first time buyers with a stable employment history and a certain income level.
Toyota, Nissan, Honda, and Kia are among those that provide special rebates and loans for college graduates. You need to contact your local dealers to find out if you qualify for these programs.
Another great lending source for first time car buyers are credit unions.
Many credit unions will work with borrowers who have little or no credit history. If you're not already a member of a credit union, it's easy to join one.
You may find that none of these options works for you, in which case you will need to look for a low-priced used vehicle and save up enough money to purchase it outright. In the meantime, you will want to start building your credit by using a credit card and paying your bills on time each month. It's a long-term process but will come in handy in the future.
My Recommendation for Car ShoppersTrueCar No-Haggle, CarsDirect, and NADAGuides are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid