Planning To Purchase Your First Car

Friday, February 10, 2022

Is buying your first car something on your 2023 vision board? This major purchase is something not to be rushed into. Proper planning, research and advice is needed - ahead of time. While we are still fresh in the new year, now is a perfect time to start this exciting journey. Before you make decisions like what colour car you want and how much horsepower it has, a finance plan must be made. YNCU is here to ensure you plan properly in order to achieve this goal.

What is your ACTUAL budget?

Between repairs, insurance, maintenance and standard monthly payments (if that is the option you choose) there are many things to consider when creating your car budget. Regardless of which financing method you select, we recommend putting 10 to 20 percent of the cost of the car towards the down payment, which means that it is best to have a lump sum put aside before taking the next step in this process. You must also ask yourself — how much of your monthly income can you comfortably put towards the vehicle?

Let’s talk about financing options

The three main options are leasing, loaning, and buying. Loaning is the most popular option and it allows you to purchase the vehicle as soon as possible. However, interest rates are a huge contributor to how much you are actually paying for the car and interest rates differ with every financial institution. Your credit score is also a major factor in how much interest you pay. Buying the car in full up front is the cheapest option in the long run (no monthly interest) and would be the best option if you are able to save that lump sum. Leasing would come under the umbrella of borrowing and would be possible directly through the car company. Take time to do research into the leasing options at car distributors in addition to looking into the different loan rates available to you at your local financial institutions.

Narrow down your options

The first question you must ask yourself when car shopping is “What do I want this vehicle for? What will be its purpose?” Is it to commute to work thirty minutes away? Is it just for style and convenience? Is it to transport items that take up alot of space? After you’ve answered these questions, make sure to consider the climate you live in. Do you have to contend with snow, hills, or rocky roads? These questions help you decide whether you need a pickup truck, a hybrid car, or a vehicle with 4-wheel drive. What about your priorities regarding the vehicle? Is comfort something you absolutely need? What about extensive safety features? Are technology features a must?

The most important decision in this process however, is whether you need a new or used car. This decision greatly affects how and what you pay for the vehicle. While used cars might be cheaper, wear and tear, mileage and the possibility of frequent breakdowns come into play. Because of the risks used cars come with, it may be more difficult to finance it through loans. However, the budget is what should be top of mind throughout this process and for a tighter budget, a used vehicle is the best option. Plus, if you do enough research, you may find a used vehicle that meets all your requirements and poses very little risks, while staying within your budget. Some used car dealerships also offer warranty plans, similar to those you receive when purchasing a new car. If your budget is able to finance a new car, you may be happier with this option as new cars have more up-to-date technology, better safety features and possibly improved fuel efficiency. However, a new car comes with a higher insurance rate, and high credit score requirement.

Test drive and seal the deal!

After narrowing down your options to two or three cars, take the vehicle for a test drive and have it inspected by a trusted mechanic. It is also wise to have the mechanic in the vehicle with you during the test drive. Before signing papers and settling on the price, ensure you are aware of the average selling price of the vehicle and that you understand proposed warranty agreements. Seek advice from car owners you trust to avoid being low balled by your car seller. Do not be afraid to negotiate.

Last but not least, insurance

After securing your vehicle, auto insurance will need to be arranged before you can drive it off the lot. You have four insurance options to choose from — third-party liability, statutory accident benefits, direct compensation and property damage coverage, and uninsured automobile coverage. Do ample research on different insurance providers and work with a licensed insurance broker.

As a committed community partner, YNCU has a special place in our hearts for environmentally friendly vehicles. We offer an Electric Vehicle Loan with an additional loyalty bonus for our valued members. If you choose to finance your vehicle with the loan option, we highly recommend taking advantage of this limited time offer. 

If an electric vehicle is not your speed, YNCU can still support you and give you a head start with our secured and unsecured loan options.

For all your general financial inquiries and how you can plan out your financial goals, come talk with someone at your YNCU branch!

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