Just a few years ago, I was a twenty-year-old kid who desperately wanted a car. I was working a couple miles from home and walking or taking the bus in 100-degree weather or in deep snow. Getting my first car wasn’t as easy or simple as I expected. Not having anyone to cosign a loan or gift me the funds for the vehicle, I had to do it all on my own. Plus,with a very low wage paying job, my chances were very slim. I also soon realized that I had no credit history thus a very low score.
As a millennial now in your mid-twenties and even early thirties, I hope this situation does not relate to you in the present times. Irresponsible actions from the past, debt and financial illiteracy may be your huddles today and they are keeping you from a transportation vehicle that you own. In some areas like New York City, owning a car and even knowing how to drive is not necessary. In the Washington D.C surrounding areas, it is a totally different atmosphere. A vehicle of your own comes very handy.
This article will focus mainly on the issues certain millennial face when trying to purchase a car. Thankfully, there are a few things that you can do to jump over the financial obstacle that may be refraining you from buying a car.
Don’t Take Out Any More Credit
While working as a banker, I encounter consumers who incur more debt on their credit cards while they were implementing a plan for a new vehicle. These were clients who has issues with their credit, were saving or reducing their overall debt. Common sense says that this is not the wisest move, but it can also be argued that emotions play in it too. The important thing is to learn to delay gratification. Are you struggling to get a car loan? It’s best not to take out any other types of loans or financing. If you do and your application is denied, this will only worsen your credit rating and the chances of you being granted a car loan will diminish.
Save Up for A Larger Down Payment
Unless you’re making the one-time cash payment for your vehicle, you will be expected to make a down payment for the car. I’ve had clients who finally got accepted for a loan because of the amount financed was reduced. To do so, you must present more cash. So, it’s best to save up as much as you can. In many cases, the bigger your down payment is, the better interest rate is offered to you and the more competitive the loan is.Unfortunately, a poor credit score also increases your rate. I recommend being patient while working at fixing your finances.
Make Sure You Shop Around
At 20 years old, I was already aware that I needed to find the best deals and I shopped long before I made a move. More established dealerships may be less flexible or less willing to negotiate so it is your job to do some homework. It is also useful to use your network and benefit from potential relationship. Nonetheless, be very careful in submitting applications as your credit history is being pulled each time. When looking for alternative financing options besides the major brand dealerships, companies such as Consumer Portfolio Services may be more willing to work with you and attend to your specific situation.
Start with a Basic Car
I was always told to go with a reliable car. In fact, Japanese makers have the reputation of manufacturing long lasting vehicles although American brands are now catching up. This is not the time to shop for a BMW or a Mercedes. In most cases, you will end up with an old one which will cause you expensive problems. Remember, you are trying to fix an issue in your finances. Once things are better and you are financially stable,your options will be broadened. I recommend starting with a basic second-hand car (pre-owned) that you are confident will be reliable.
As you can see, even with a bad credit score today, you can work and strategize to get a decent vehicle, not one that will break down every so often to cause you more financial issues. Start where you are and use these useful tips.