A car is often one of the first big purchases that people make. People who are just starting out in life probably don't have much of a credit history. So, how do you go about getting a good loan for a car?
Well, if you can't come up with the money (which most people can't if they want a fairly new car), the best thing you can do is get ready early. Get your credit in order at least a year before you want to take out an auto loan.
This doesn't mean you should go get a bunch of credit cards and start charging things. It does mean showing that you have been financially responsible as an adult for a long time. When you go to get a loan for a new or used car, you should know what kind of credit history the dealer will be looking for. This doesn't mean that you can't get a car loan if you don't have a good credit history. There are plenty of lenders who are more than happy to take advantage of people with bad credit by not turning them down but instead slapping them with huge finance charges and impossible-to-make monthly payments that will let them collect interest on you for years.
Don't let it happen. Do some pre-planning.
If you don't already have one, you should open one. Savings accounts are fine, but checking accounts require you to keep an eye on the balance and make sure you don't bounce checks or go overdrawn, which gives you some credibility as a money manager. It also makes sure that your auto payments go through a safe route. You can have them taken right out of your bank account. Set up direct deposit with your employer if you can (you must have a steady job, of course), so that your bank records show a steady flow of money coming in every two weeks. Direct deposit also keeps the money out of your hands and in the bank, where it is safe. This brings up the other important point:
Save up for the down payment!
A good down payment will not only lower the amount you need to finance for your new car, but it will also make you look like a safer financial bet, which will probably lead to a better financing plan. Financing will go much more smoothly for those who have at least a quarter of the purchase price in cash.
Lastly, it might be a good idea to get a small loan from the bank about a year before you buy your first car. Make the loan small enough that you won't have trouble paying it back, and then, most importantly, pay it back. on time, with payments made every month.
It's important to show the car lenders that you're a good investment for their money. You'll be glad you set up payments on that new set of wheels when the time comes. No one wants to be paying off a car loan long after the car has been taken to the junkyard.
