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6 Things You Should Know Should Know About Car Financing As A Young Adult

6 Things You Should Know Should Know About Car Financing As A Young Adult
Everyone would love to own their own car since it’s more convenient than alternative transport methods, which is also why so many people have opted to buy their own car.
Owning your own vehicle allows you to go to school, work and visit friends anytime you need to, but as a young adult, financing can be confusing and a little daunting. In order for most young adults to afford to own a vehicle, they need vehicle finance. So it’s always good to be knowledgeable about what lenders do and how can their finance options can help you.

Being knowledgeable helps you make good financial decisions which won’t leave you with serious debt. Most people think all debt is bad, but that isn’t the case. Managing your finances badly will lead to bad debt, here is everything you need to know about financing a vehicle as a young adult.

- Create a budget

If you’re planning on purchasing a vehicle, then the most useful tips for financing a car as a young adult would be to calculate your budget and check your affordability.

Make sure that you have written down your monthly expenses and have calculated that purchasing a vehicle is well within your means. Don’t make the mistake of wanting to purchase an expensive vehicle that you’re unable to pay which will lead to you having bad credit.

Many lenders now offer a vehicle finance calculator. These calculators help you deduce how much your monthly installment would be. However, the calculator is only offering you a guideline. If you’re planning on getting finance from a lender, always speak to a financial advisor.

- Brand new or second-hand?

Many car buyers have chosen to buy second-hand cars. The quality of second-hand cars has increased over the years, and so buyers have found that you don’t need to buy a brand new car in order to own a great car.

There are plenty of good affordable second-hand vehicles you can get that will last you a very long time. As a young adult who is still building their career and life, financing a brand new vehicle might not be the best financial move.

- Think of the added costs

When you’re thinking about financing, it's more than just the car and its monthly payments. You need to think about the added costs too, like car insurance, petrol, and maintenance. When you’ve decided on which car you’re buying,  consider how much petrol it will consume and if that’s within your budget.

It’s important that you keep this in mind because, in the long run, you don’t want to have a car that you can’t afford. Financing a car shouldn’t feel like a burden, so choose an option that is suitable for you.

- What car loan repayment options are there?

You need to think about how you’re going to do your car repayments. Many lenders have different payment options when customers want to buy a car. You can either have a normal payment arrangement or you could set up a balloon payment. A balloon payment is when banks reduce your monthly instalment. Once you reach the end of your term you will have to pay the remaining lump sum. That lump sum can be settled immediately or you can apply for refinancing.

When you apply for refinancing, it simply means you will take up another loan in order for you to pay the balloon payment. Another option is to trade in your car - once you trade in your car you can use the trade in money to settle the remaining balance. Make sure you do thorough research your options before making any final decisions.

- Get pre-approved first

It would be a good idea to get pre-approved for financing before looking for a car or making an offer. You don’t want to get your hopes up and that of the salesman when you don’t know if your loan has been approved. Car salesmen are always looking to close a deal so don’t put yourself in an awkward situation. Make sure you look for a vehicle once you have been pre-approved. By doing that you can also know what your price range is and what car you can afford.

- Shop around

When looking for the right car, don’t settle on one seller or dealership, it's always best to shop around. When you shop around and look at more than one dealership, you might find the car you’re interested in selling at a lower price.

In order for you to find the best deal, make sure that you visit more than one dealership. Look through vehicle magazines and online since many dealerships have online websites, which makes it easier to search for the car you would like.
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