Do your research.
Check out the Consumer Used Car Rating Guide or Consumer Reports.
Be aware.
Know what to look for to avoid buying a lemon or paying too much. Check out the Kelly Blue Book.
Don’t rush.
Don’t let a salesperson rush you into a car you don’t want. On the other hand, don’t rush into buying a car that isn’t what you really want or need.
Manage your money.
Remember that there are more factors to purchasing a car than just the sale price.
Establish your credit.
You may need a credit history to get the financing to buy a car. You can have your parents cosign the loan with you.
Ask for help.
Ask friends, family, teachers for help in closing the deal. Get the help of a mechanic to evaluate any used car you are considering.
Financing your First Car
Many teen car buyers are so excited about buying their first car that they don’t take into consideration how they will pay for it. The costs can be overwhelming, from insurance and maintenance to gas and incidentals, not to mention the actual car.
Until you get a credit card, you most likely won’t have a credit score, or it will be below 550, in which case you likely won’t receive financing. If this is the case, you might be required to wait 6 months to 1 year to establish a credit history before buying your first car. It’s relatively simple to begin your credit history with a gas card or a made-for-teen’s credit card from companies like Visa and MasterCard. Once you obtain a card, use it wisely and pay it off in full each month. Keep in mind that all late charges get reported on your credit score. After you achieve a sound credit history, lenders will look at other factors before qualifying you for a loan including your monthly income. Most lenders require a monthly income of $1,600. If your earnings don’t meet this requirement, you’re not going to receive the loan.
What can you do if you’re denied your loan? Ask your parents if they’ll co-sign your loan application. In this case, the loan is in your name, but your parents are designated as co-signers. If you fail to pay, your parents will be responsible for the payment. If your parents co-sign for a loan, you will receive the benefit of establishing a credit history in your name. Keep in mind, if you and your parents both fail to pay the loan, both credit histories will be affected and ultimately the car will be repossessed. If handled correctly, a co-signed loan is completely safe and beneficial to both parties.
If you’re parents aren’t willing to co-sign your loan, here are the guidelines you’ll have to meet before receiving solo financing:
- Monthly income of $1,600 or more
- Steady address for at least six months
- Steady employer of at least six months
- A year of established credit history
- A credit score of 600 or higher
