How to Finance Your First Car

If you’re trying to finance your first car, Indy Car Financing is here to help. We’ve compiled a handy list of tips to make your first car financing experience as easy and pleasant as possible.

Establish Credit Beforehand

Whether you’ve recently started building credit or you’ve been using credit for years, your credit score is going to make a significant difference when you finance your first car. For shoppers who haven’t yet established credit, start doing so for a minimum of six months by securing a low interest credit card. Make sure that any necessary payments are made on time. Missed or late payments will have a negative impact on your credit rating. The lower your credit score, the more you will have to pay for an auto loan when it comes time to secure auto financing.

Make a Budget

To thoroughly understand how well you’ll be able to finance your first car, you should create a realistic financing budget. Here’s what you should explore when developing a budget to pay for your financed vehicle:

• Examine Expenses: Go over your current cost of living and see where you can afford to cut back. Shelter, food, and insurance should all take precedence, while taking into account the cost of your vehicle, your monthly payments, car insurance, and maintenance.
• Establish Your Needs: Whether you’re a single driver or a head of household with a family, you’ll need to budget for a vehicle that meets your transportation needs. Explore vehicles that will be efficient day-in and day-out cars.
• Prioritize Wants: While this may seem contradictory to the previous points, but you’ll want to budget for a vehicle that actually satisfies your style and is a car that you really want to drive. Identify the “wants” that you have for your vehicle and budget accordingly.

Understand Some Basic Terms

Since this is your first time financing a car, you will likely encounter terms that you aren’t wholly familiar with. These terms might include:

• Down Payment: A down payment is the initial payment made for a vehicle when financing a car. By making the largest down payment you can afford, your monthly payments will be lower as a result.
• Monthly Payment: This is the amount of money you will have to pay on a monthly basis to finance your first car. Be sure that these monthly payments fit into your regular budget so that you avoid going into debt.
• Interest Rate: The interest rate for a loan is the percentage increase applied to your monthly payment. You’ll want to finance with the lowest APR (annual percentage rate) possible, which can vary based on your credit history and where you finance your loan.
• Loan Term: Your loan term is the amount of time you’ll spend making monthly payments on your loan. On average, 48 months is an ideal loan term, but if a shorter or longer loan term better fits your budget, consider that instead.

Shop for Loans Before you Buy

Regardless of what your credit score or budget might be, the best way to secure an auto loan that works for you is to shop around. Consider other offers before taking one that a dealership provides, because you might discover that you can get a better loan elsewhere. But remember, dealerships also have exclusive promotions that can sometimes lower your down payment. Be smart and consider all of your options before signing a contract.

Ask Indy Car Financing for More Information

Armed with these tips, you should be ready to finance your first car. If you have more questions about how to get started, contact Indy Car Financing today at 855-468-6215.

Other Finance Questions? Visit Our FAQ Library