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Auto Loans

A Millennial’s Guide to Getting Your First Car Loan

auto-loan-down-payment

Buying a car is almost a rite of passage. Making that first car purchase, negotiating with the seller, and arranging financing (if you need an auto loan) all require a certain amount of savvy.

And, once you successfully achieve the car-buying milestone, another signpost looms in the distance: Refinancing.

Whether you’re getting an auto loan for the first time, or you want to refinance your existing car debt, it’s important to be an informed consumer. Here’s what you need to know.

Get your finances in order

Before beginning your car search, you need your finances in order, according to Joe Pendergast, the vice president of consumer lending for Navy Federal Credit Union.

“Know your budget, check your credit score, and review your existing credit accounts to ensure they are reported accurately,” Pendergast said. Your credit situation can directly impact the interest you pay on your auto loan.

Emily Shutt, a certified financial coach who works closely with millennial women to help them manage a variety of money issues, suggested calling around to different dealers and banks or credit unions to see what credit bureau they use to check your score. Then you can check your report for errors and have them fixed before you talk to someone about financing your car purchase.

“Having errors on a credit report can negatively impact score, which can put you at a huge disadvantage when you’re negotiating for an auto loan interest rate,” Shutt said.

You should also know ahead of time where you stand with your budget. Use an online loan calculator to determine what you can afford in terms of a monthly payment. For example, if you think you can handle a $305 monthly payment, and you have the credit to get an interest rate of 2.9% for a five-year loan, you might feel you can afford to borrow up to $17,000 for a car.

Save up for a down payment

Just because you might be able to borrow so much for a car doesn’t mean you necessarily should. In fact, saving for a down payment makes a lot of sense, Shutt said. Not only does having a down payment help you to better negotiate your loan rate, but it also can allow you a shorter loan term and save you money in the long run.

Play around with the numbers a little with an online calculator. If you can put $7,000 down, so that you borrow only $10,000 of that $17,000 car, you could maybe get an interest rate of 2.5% and a loan term of three years. Even better, your monthly payment would only be $289 — and you’d save $1,494 in interest.

The less you borrow, the more money you have in the end. And that’s money you can put toward investing in your future, rather than paying interest to someone else.

Know what you want — and what it costs

Once your finances are in order and maybe you have a down payment saved up, it’s time to figure out what you can actually buy. Avoid over-borrowing by knowing what you want in a car and having an idea of what it costs, Shutt suggested.

“Everything should already be online so you can get a sense of what all the options are,” said Shutt. A little research can go a long way toward helping you get a sense for which cars will fit into your budget.

Shutt pointed out that the job of salespeople is to get you to spend as much money as possible. The more you spend, the more you have to borrow — and the more you’ll pay in interest. “Confidently stand your ground when a salesperson tries to upsell you or steer you in another direction,” she said.

Pendergast agreed on the need to research your car choices ahead of time. “Know the price other dealerships in the area are offering so you can make an informed purchase,” he said.

It’s even okay to play one seller’s price off another’s to get the best deal. Don’t be afraid to let the other dealerships know you’re shopping around. They’ll be more inclined to negotiate with you, potentially resulting in a better deal.

Get an auto loan quote from a bank or credit union

Before you ask for dealer financing, suggested Pendergast, talk to a bank or credit union.

“You should see what type of loans your financial institution has to offer,” said Pendergast. “This will give you guidance for your budget, but will also increase your purchasing power to help you in negotiations, regardless of the dealer’s proposition being on par with the lender’s.”

Donald E. Peterson, a consumer lawyer with almost 30 years of experience, warned that dealer financing still often requires the involvement of a bank or credit union. Dealers submit your information to lenders and get interest rates quotes back.

“Sometimes dealers mark up the interest rate above the rate banks would buy the loan at,” Peterson said. “The bank and the car dealer split the excess interest, usually 50-50.”

This practice isn’t just limited to banks, either. “Some credit unions have entered into interest-rate kickback agreements with car dealerships,” Peterson said. “You must apply to the credit union yourself to get the best rate.”

Starting with a financial institution allows you to get an idea of what’s available to you. Then, you’re in a position where a dealer who wants to finance you has to match the rate you’ve already been offered, rather than steer you toward an alternative arrangement.

Consider a cosigner

With my own first auto loan experience, I had to deal with the fact that I had a thin credit file. I didn’t have enough credit established to get a car loan without an unacceptably high interest rate.

I went through the steps of creating a budget and deciding how much I could afford, including factoring in my car insurance costs. However, after checking my credit report, I realized that having a credit card for six months wasn’t enough for me to establish much of a credit history.

After compiling research about the types of used cars I could afford, and how my earnings from my job were enough to cover an auto loan payment, I approached my parents. My dad was willing to cosign on a modest car loan through his credit union.

My interest rate — and my monthly payment — were lower because I had cosigner with good credit. I made all my payments on time, helping build my credit history so that the next time I bought a car, I was able to get a good interest rate without the need for a cosigner.

As you research your options, don’t forget about the possibility of using a cosigner. If you don’t have the credit history to get a good auto loan rate on your own, borrowing someone else’s good name can help you save money — while at the same time allowing you a way to establish your own credit for the future.

Don’t fall for the monthly payment scheme

While you do want to figure out what monthly payment you’re comfortable with, you don’t want to get caught up in it at the dealership, cautioned Shutt.

“Focus on the all-in price of the car,” said Shutt. “If the salesperson can get you to verbalize a monthly payment target, they’ll just manipulate other factors like the duration of the loan.”

When that happens, Shutt pointed out, you might end up hitting your targeted monthly payment, but long-term interest charges and other factors could mean that your car ends up being a lot more expensive. She said you should figure out about how much you’ll pay each month over a loan term you’re comfortable with, and then buy a car with a final price that fits those parameters.

“Take your time, and don’t be manipulated,” Shutt said. “If you’re not comfortable negotiating, bring a friend or family member who can support you in sticking to your budget.”

What about refinancing?

In some cases, you might discover that you qualify for a lower auto loan interest rate than you currently pay.

“Maybe you’ve been making timely payments for a year or two and your credit score has gone up,” said Shutt. “Now you can consider refinancing the loan.”

However, it’s important to be careful moving forward. Just as you shop around for the best auto loan rates on a new loan, it makes sense to shop for refinancing rates. Check with a few banks and credit unions to see if you can get a few quotes for refinancing.

When you refinance, watch out for lengthening the loan term. If you only have three years on your term, it might not make sense to refinance to a five year loan. Instead, only refinance what you have left. You could save on interest charges and still get rid of your car debt in the original time frame.

Shutt also recommended looking online for car loans. Compare the rates you find with online auto loan refinancing platforms to what your local financial institutions offer. By playing different lenders off each other, you could strike a better bargain — especially if you have good credit.

Know your finances and be ready to negotiate

Auto loans are a massive industry, with more than $1 trillion owed to U.S. lenders. Rather than being just another statistic, consider how you can come out on top.

Know your finances and understand what you can expect, Pendergast said. When you know where you stand, and when you research ahead of time, you can call dealers and lenders out. Shop around for the best auto loan rates and terms, and let dealers know you’ve done your homework, so that negotiations will go much better, saving you time and, importantly, money.

 

If you want to be sure your credit is good enough to purchase a car, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Image: iStock

The post A Millennial’s Guide to Getting Your First Car Loan appeared first on Credit.com.

Source: credit.com



15 Items to Keep in Your Tornado Safe Space

Did you know the U.S. has an average of more than 1,000 tornadoes recorded each year?

There are two regions with an excessively high frequency of tornadoes. Florida is one and “Tornado Alley” in the south-central United States is the other, according to NOAA.

If you’re in the part of the country that’s prone to tornadoes, you need to have a safe room to go to when the weather turns bad.

Your safe spot will shield you from the wind, hail and flying debris. A safe location should have no windows and could be a basement, storm cellar or an interior room on the lowest floor of your apartment building. An interior closet or bathroom in your apartment is also a safe place to hunker down in.

Items to keep in your tornado safe space

When you have to go to your safe space, you never know how long you’ll be there. It could be 30 minutes and it could be for several hours. You need to be prepared, not only with essentials but also with things to keep you and your family distracted and calm. We’ve organized a list to help get you through the storm with useful items for your safe space.

1. Water and snacks

Water and munchies are a must for everyone in your safe space. Plan ahead with water bottles and non-perishables. Keep foodstuffs organized.

Have a bag you can grab to take with you to a storm shelter or your safe space in your apartment.

water bottles

2. Baby and toddler food

Have a baby in the family? Be sure to have formula, bottles and baby food with utensils ready for your tornado safe space. Or, pack it to take to a shelter.

If you’ve got a toddler, have Cheerios and other favorites in resealable plastic bags for easy accessibility.

3. NOAA radio

You should get a weather radio so you can listen to NOAA Weather Radio. It will keep you tuned in to emergency info about tornado watches and warnings.

4. Footwear

You don’t know what the conditions will be like during the weather event and post-storm climate. FEMA recommends wearing closed-toe shoes like boots or sturdy sneakers. A likelihood of broken glass and other rubble that could prove dangerous.

shoes

5. Protective gear

In case of the tornado hitting full out in your area, be ready for anything. Keep bike helmets to protect from falling debris with you. Have a helmet for everyone in the family.

And if you have room and the time to drag it, bring a mattress with you. It could protect the entire family in case of flying glass, doors or other debris.

6. First aid kit

Prepare a small backpack with Band-Aids, antiseptic wipes and more, or buy a first aid kit that’s already full of necessities.

If a tornado warning occurs, you can grab the backpack on your way to a storm shelter, or stash one in your apartment’s safe space.

7. Sanitation and hygiene supplies

How long will you be in your tornado safe spot? Only Mother Nature knows for sure. Since it’s always better to be ready ahead of time, have a few personal hygiene supplies on hand. Think disposable towels, hand sanitizers, portable tissue packs, toilet paper and trash bags.

hand sanitizer

8. Necessities for kids

Be sure to pack a safe space or shelter bag with necessities, such as diapers and wipes for babies. Also, have a go-bag with anything special your toddler needs. Include favorite washcloths that could prove useful.

9. Flashlights

Power losses are likely when high winds blow. Be sure to have a battery-operated lantern and other flashlights. Also, plan ahead with extra batteries.

10. Cell phone chargers

Don’t risk your cell phone going to black. You may not have power, so be prepared with a portable universal battery cell phone charger. Find one with USB ports for several phones.

11. Personal docs

It’s always smart to keep important documents in one place. In a storm situation, keep them in a waterproof bag. Safeguard your passport, insurance papers and your checkbook.

12. Activities for kids

If you have little kids, be sure to have supplies to keep them busy while you wait out the wind. It will be a good distraction.

Charge iPads charged, bring crayons and coloring books, a board game and favorite stuffed animals for nap time. Have pillows and blankets, too.

coloring book

13. Adult distractions

Adults need their own versions of safe space distractions. Have your iPad mini and access to the novel you’re reading (or listening to). Bring your crossword puzzle book and the like.

Have pillows and a blanket in your safe space, too. These things could help make the waiting period for the storm to pass more bearable.

14. Dog or cat accessories

Does your dog or cat get traumatized in thunder, wind and rain? Have a thunder vest or shirt that they can wear. It can squash anxiety through gentle, constant pressure.

Create a spot where cats will feel safe to hide under a blanket. Also have water, food, treats and toys for your pets.

15. Meds and eyeglasses

Remember to keep your medications and eyeglasses (and contact lenses) with you in a storm. Keep headache pills and other medications you take in your safe space, or in the shelter bag you’ve packed. Include daily prescriptions, insulin, epinephrine auto-injectors and anything else you may need, along with contact lens solution and eye drops.

After the storm

According to the Weather Channel, it’s critical to be sure that a storm has truly passed before going outside. Check for updates on your NOAA Weather Radio, local broadcasts or cell phone. These outlets will be able to provide the latest weather information related to the storm where you live.

The post 15 Items to Keep in Your Tornado Safe Space appeared first on Apartment Living Tips – Apartment Tips from ApartmentGuide.com.

Source: apartmentguide.com




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