Managing Payments as A First-Time Car Buyer
Buying a car for the first time can be very exciting, but it can also be very overwhelming. Purchasing a car is a major financial responsibility, and adding a car payment to your budget can be a difficult challenge. Planning for car payments ahead of time can help ease the stress involved in this major purchase so you can just relax and enjoy your new car. Here are some helpful tips for managing car payments as a first-time car buyer.
Be realistic about your budget.
It’s tempting to be aspirational when thinking about paying off a car, but this can get you into serious hot water down the line if your income doesn’t live up to your expectations. Before making a purchase, it’s important to set some realistic expectations for budget during the time that you’d be paying off the car. It’s best to plan to make slightly less than you expect, so that you’ll have a small cushion if your income becomes compromised at some point. It’s also dangerous to bank on getting new jobs, promotions, or raises to pay off your car loan, as you can never be sure that these things will materialize. Setting realistic budget expectations before you even start looking at cars will help you make the best decision for you.
Look into financing options thoroughly.
Financing options can help make your car more affordable, so you can get a better quality car at a more affordable price your first time buying. Most dealers have at least a few different financing options for your car, and it’s very important to know the differences between them and how that can affect your budget. Some financing options may look appealing on the surface, but in the long run cost you more money. If you aren’t great with math and budgeting, ask a family member or friend who is to help you look over financing options before you go into the dealership. It’s important to walk in with a general impartial idea of what you want to do before the dealer starts trying to sell you anything.
Get in the habit of cutting out extras.
If you’re on a tight budget, you may need to cut out some of the ‘extras’ that you were spending money on before you got the car. Before making the purchase, go through your budget and look for places where you can easily make substitutions for cheaper items. For example, if typically get a coffee before work, consider brewing your own coffee at home. If you like to go out to movies, try renting them instead. If you’re in the habit of going out to dinner with friends on the weekends, consider hosting a dinner party instead. Once these things become a habit, you won’t think too hard about them, but you’ll likely save plenty of money in the long run by doing this that you can put towards your car payments.
Don’t forget about other car-related expenses.
When planning out your car payments, you’ll also need to consider the additional expenses that come with owning a car, such as gas, insurance, and repairs. These should factor into your overall decision when buying a car. For example, buying an older used car may mean cheaper payments, but if you have to spent money on repairs regularly, it might make more sense to spend more money on the payments to get a newer model. As a first time car buyer, your insurance might be expensive as well, so be sure to talk with your insurance company to find out how much you’ll need to budget for car insurance. Don’t be afraid to shop around for different types of car insurance either until you find a plan that fits your budget.
Start a car payment savings.
In the months leading up to purchasing the car, start putting away little bits of extra money here and there to go towards a car payment savings account. Even just saving small amounts of money can make a huge difference in an emergency. If you are lucky enough to fall into any unexpected amounts of money, it’s also helpful to put that towards your car to lessen the amount of interest you’ll end up paying in the long run.
As a first time car buyer, the most important thing to do is to plan well in advance so you can make your payments with ease. While it’s difficult to adjust to this new financial challenge, making saving and budgeting a habit will help lessen the burden.