Buying Your First Car: What Young Adults Should Know

Buying your first car is a big step toward independence. Before you start shopping, understanding your budget, credit, and financing options can help you avoid unnecessary costs.

Budget Beyond the Car Payment

The monthly payment is only part of owning a car. Your budget should also include insurance, gas, maintenance, repairs, taxes, and registration.

Get an insurance quote before buying, and leave room for savings and unexpected expenses. The goal is to choose a car you can comfortably afford to own.

Understand What You’ll Pay

Three key pieces shape your auto loan:

• Interest rate: What you pay to borrow money. Compare the annual percentage rate (APR), which accounts for interest and certain loan fees.
• Loan term: How long you have to repay the loan.
• Monthly payment: What you owe each month.

With the same loan amount and rate, a longer term lowers your payment but increases total interest. A shorter term generally means higher payments and less interest.

Use an auto loan calculator to compare payment amounts and total costs before shopping.

Know How Credit Affects Your Options

Lenders consider your credit history, income, and existing debt when reviewing your application. Stronger credit may help you qualify for a lower rate.

If you have limited credit history, you may need a co-signer. That person is also responsible for repayment, and missed payments can affect both your credit and theirs.

Compare Financing and Get Pre-Approved

Dealership financing can be convenient and may include promotional offers. Banks and credit unions also offer financing, giving you options to compare.

Pre-approval can help you understand your potential rate, loan amount, and payment before visiting a dealership. Your approved amount may be more than you’re comfortable spending, so stick to your own budget.

Compare APRs, loan terms, fees, and total repayment amounts. Notre Dame FCU offers auto loan assistance, including pre-approval.

Shop and Negotiate with Confidence

Keep these steps in mind before signing:

• Ask for the out-the-door price, including taxes and fees.
• Review optional add-ons and how financing them changes your total cost.
• Check the vehicle’s history and consider an independent inspection for a used car.
• Read the final agreement to confirm the price, rate, term, and payment match what you agreed to.
• Take your time. You can ask questions or walk away.

Protect Your Budget After Buying

Make every payment on time. Automatic payments or reminders can help, but make sure funds are available when payments are due.

Continue saving for maintenance and repairs, and choose insurance coverage that meets your needs and your lender’s requirements. Mission Insurance can help you explore coverage options.

Planning ahead helps you enjoy your first car while keeping your other financial goals within reach.