On Monday I walked into Balise Toyota at 2 p.m. and on Tuesday at 5:30 p.m. I was driving my dream car, a Prius, home.
A lot happened in those two days and for a long time working up to the big day. I began the journey to getting a new car over two years ago, when I first began researching the steps that go into purchasing one.
Despite all of this preparation ahead of time, I realized I was still wildly unprepared when it came down to signing on the dotted line.
The first thing I did was look at the requirements to getting approved for a car loan. Credit is what you need, and a lot of it. If you don’t understand how credit is rated I can explain. A really good credit score is 800, and a bad one is 200. The better credit you have the lower your APR stands for annual percentage rate, which is the percent of interest your leanholder charges you each year for your car.
APR can be as low as .05 percent and as high as 23 percent all depending on your credit.
Business manager of Balise Toyota Emmanuel Avgoustakis suggests that after making a year’s worth of payments on the car, refinance the car with a different bank in order to lower your monthly payments for the rest of the duration of the loan.
So how do you get your credit up, or have any credit at all? Well, a lot of factors affect credit, but basically the bank wants to see that you pay off all your debt on time, which includes student loans. Also, it couldn’t hurt to open a few store cards, make purchases and pay them off right away.
When I started school, I took out a $2,000 unsubsidized Stafford loan to build credit, and then I opened up an Aerie and Macy’s store card.
From there I also got approved for a Target card, which I use and make monthly payments after I buy things. The better credit you have, the higher credit limit you’ll have, so you can spend even more money. However, if you pay off all your cards, this will increase your credit to debt ratio, which you want to be fairly low.
Building your credit doesn’t happen over night. Like I said, I’ve been building my credit up since 2011,so it’s definitely a process. Unfortunately, it doesn’t just take good credit to buy a car, you also have to have this thing called a “full time job” in order to get approved.
Since as a college student that can be a really difficult thing to fit into your schedule, you probably won’t be able to get approved that is why most people our age need a cosigner to get approved for a car.
A cosigner could be a close family member or friend of the family, who would be willing to put themselves out on a limb into order for you to get a car.
My situation is unique as I am married, so my husband was my cosigner, because he works more than I do. Our two incomes put together goes a lot farther than just mine or his.
The rule of thumb is, in order to afford car payments, your weekly paycheck should be the amount of the payment or more. For instance, if the car payment was $250 a month, you should make at least $250 a week in order to be able to make the payments on time.
If someone else is helping you pay and cosigning for you, this is not as necessary, but you don’t want to be scrambling each month to come up with the money, then have your car repossessed.
The last thing that affects APR is down payment. Down payments lower the price of the car and therefore the monthly payments will be cheaper. The APR could be higher if you decide you can’t afford to put any money down. Now, it all depends on the cost of the car, but a good range is $1,000 to $5,000 down on a car in order to get the lowest APR.
Obviously, this isn’t an exhaustive lost of factors that affect APR, I’m just listing the most important ones that you should know.
Next is the fun part: the research.
What are you looking for in a car: roomy interior, cheap cost, safety, fuel efficiency?
Decide what’s most important to you then look for cars that match your needs. I commute to school from about half hour away, so I spend all of the money I earn on gas, literally.
So, since I knew that fuel efficiency was really important to my needs, I deciding on getting a hybrid, and I ended up getting a Prius, which gets 51 mpg in the city and 48 mpg on the highway.
Even though I doubled checked my credit before I went to the dealership, I was really nervous everything was going to go wrong, and truth be told it did. Basically, I learned that you can’t prepare for absolutely every possible scenario and something you won’t think will be a problem at all, will be.
While I was at the dealership, I had a headache, my back was killing me, and my stomach kept churning over and over, but it was completely worth it when the very next day I drove out with my dream car.
The feel was indescribable, and I hope it can happen for you too.