Buying a car and getting financed can be very stressful even for someone who has bought multiple cars through the years.  When buying a first car, it may be the biggest purchase you’ve made in your life, up to this point.

Cash or Finance

You may be wondering if you should buy a cheap cash vehicle or use your cash funds as a down payment.  For the most part, there are few great vehicles for sale under $2000.  If they run, they may have high mileage (sometimes 200,000+ miles), heavy wear, or there is a known problem with a mechanical system.  If you or someone you’re close to is a mechanic, and you can reasonably budget for the vehicle purchase price, and the parts and labor, then it might be a good option.  If you don’t have even a ballpark estimate for fixing a major repair, you may not want to do a cheap cash car.

Financing your first vehicle brings up additional considerations including credit score, and financing approval.

Credit Score

finances

Most first time car buyers do not have extensive credit history.  Some may have a credit card, or store charge card, while others may have no credit history.  When applying for financing the dealer will check your credit report. If you have established some credit with a credit card, there may be a first time buyer financing program available with a bank or credit union.  If you haven’t established any credit, have carried a balance, or been late on payments, there may still be a financing option so long as the other factors of qualification are met.

Time at Job

In order to get financing, the lender will want to be sure that your income is stable.  You will need to prove your income with pay stubs with at least six months time on the job.  Roadblocks to proving income is if you cannot prove cash income from a side job, or if you’re unable to prove your tips.  The more time at a job shows a greater stability to make car payments.  If you have started a new job, and don’t want to go the cash purchase route, your financing options will be better if you have at least six months work history with your employer before financing a car purchase.

Proof of Residence

Lease agreement

One of the biggest financing challenges for first time car buyers is proving their residence.  Many young adults ages 18-25 will purchase their first vehicle while living with relatives.  They might not be on the lease, or have utilities in their name.  The best proof of residence is a current lease stating the applicants name with the property address.  Also accepted are utility invoices that include the applicant’s name, address, address, and an invoice dated within 30 days of the application date to purchase.  If it arrived by mail, keep the postmarked envelope that the bill came in to prove the mail was delivered to that address.  Some underwriters will be selective of what bills they will accept as proof of residence.  Utilities including water bills, electricity and gas, and cable are tied to providing a service at a specific residence/address, and should be widely accepted between lenders.  A personal letter, junk mail, or a handwritten note by a relative stating that you live with them will not suffice for proof of residence, nor give the lender confidence about your creditworthiness.  If you are looking to finance a car purchase as a first time car buyer it is in your best interest to pick up a utility bill in your name, if you do not have a lease in your name.

Building Credit with Payment History

Car Loan Approved Stamp

The good news is once you have gotten an approval, you’ll never again be a first time car buyer.  This is your opportunity to establish a positive payment history on an installment line of credit.  Banks and credit unions will report your credit history, as well as some buy here pay here dealers like Mark’s Auto Sales.  Whether you pay off your vehicle, or trade it in after a couple years, your positive payment history will help you in future car purchases.

So is there a best age to buy your first car?

Young woman with the keys to her first car

Based on qualification factors, such as proof of residence and proof of income, there isn’t a set perfect age for everyone.  Depending on where you live there may be better alternatives like public transportation, or higher expenses related to car ownership, such as parking fees, which may hold you off from choosing to purchase now.

As a car buyer, this is your shot to decide if you’re ready for the responsibility of a car payment.  Can you budget a down payment, make the car payment and cover other related expenses including insurance, maintenance, and gas?  Then now may be a great time. Click here to inquire about financing as a first time car buyer.

If you foresee changing jobs or moving out of the area soon, it may not be the best time, but there’s no reason not to start saving for a down payment now, for when you’re ready to make the purchase.  Here are some of our tips to saving a down payment.

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