What to Know Before You Buy

Your first car can give you more freedom. You can drive to school, get to work, or visit friends without asking for a ride.

Before you buy, make sure you understand what a car costs and how a loan works.

Plan for the full cost

A car loan is money you borrow to buy a car. You pay it back over time, usually through monthly payments. You also pay interest, which is the extra money charged for borrowing.

Your loan payment is only part of the cost. You will also need money for insurance, gas, oil changes, tires, and repairs. Taxes and fees add to the purchase price, too.

Find out how much insurance will cost before choosing a car. Ask yourself: Could I still cover these costs if I worked fewer hours?

A down payment is money you pay toward the car upfront. It reduces how much you need to borrow. Keep some savings for unexpected repairs, too.

Understand the loan

When comparing loans, check the APR, or annual percentage rate. It includes the interest rate and certain loan fees, helping you compare borrowing costs.

The rate in an ad may not be the rate you get. Your offer can depend on your income, credit history, and the car you choose.

The loan term is how long you have to repay the money. For example, 48 months means four years. With the same loan amount and interest rate, a longer term means smaller monthly payments but more interest paid overall.

Ask: “What is my monthly payment, and how much will I pay altogether?”

Know how credit works

Your credit history shows how you have handled borrowed money. Your credit score is a number based on information in that record. Lenders use both when reviewing a loan application.

Applying may lower your score a little for a short time. Paying on time can help build credit when the lender reports your payments. Late or missed payments can hurt it.

Under 18? Talk with a parent or guardian and the lender about borrowing rules. If you need a co-signer, that person agrees to repay the loan if you do not. Missed payments can hurt their credit, too.

Compare before you sign

You may be able to get a loan through the dealership or directly from a credit union. Neither choice is always cheaper.

Compare how much you will borrow, the APR, loan term, fees, monthly payment, and total amount you will repay.

Bring a trusted adult and read the paperwork together. Ask about anything you do not understand. If the costs are too high, keep saving or consider a less expensive car.

Have questions about your first car? Talk with Notre Dame FCU to learn how auto loans work and what to consider before applying.