Should I Apply for a Loan to get my First Car?

You have your license, now what?  It’s time to start looking for a new car. Purchasing your first car is a very exciting experience but if you are young and this is your first experience with finance, it can also be quite daunting.

There are a few things to think about when you begin your journey into getting financial help.  Setting the right budget, thinking about what type of car you want to buy and saving up the deposit are just some of the things you need to look at.  In this article, we will be looking at those and more. 

What to Consider when Getting a Loan for your First Car

When you start looking to buy your first car it is important to look at the specific car and features that you are wanting.  Do you want a brand-new car or a second-hand one, can you afford to budget the repayments if you want a new car? How big do you want the car and what do you want it to have? For example, if you are someone who loves to camp, a 4X4 might be the best type of car, but brand-new four-wheel drive cars are very expensive new, so would you rather downgrade and buy new or go for size but second hand? 

The next thing to look at when thinking about buying a new car is your financial stability – do you have a deposit for a car? Do you have the savings to buy it outright.  While this is not always the case, many people buy their first car in the early stages of financial growth. At this point, they can afford to buy a car, but doing so might drain a big percentage of their savings. If you are in this situation, then financing might be your best option.

Buying a car might also allow you to improve your credit score. If you are young, this might be one of your very first interactions with credit and finance. Your credit score plays a significant role in determining whether you'll be approved for a car loan and what interest rate you'll qualify for – if you are brand new to this, it is possible that this loan will create your credit file. If you have a limited credit history or less-than-perfect score, this is a way you can work towards increasing your credit score and improving your borrowing power.

Be Aware of your Car Loan Repayments and Budget Accordingly

It is worth mentioning that financing is not a perfect method for getting a car; it is not going to be the easiest way to do it either.  If you do not plan well or aren’t prepared to budget properly, it could cause huge financial trouble that can prove costly and damaging in the long run. 

It is important, when looking at buying a car, that you ensure you are budgeting within your limits, that means if you aren’t going to be able to service the repayments on a $40,000 loan, then you should look at borrowing less. Don’t sign a contract that you will not be able to afford as it can have repercussions for your future.

If you'd like to enquire about car loans, or wish to ask about how our car loan application process works, please contact Champion Loans. Alternatively, visit our dedicated Car Loans page to learn why you should get a loan for a car from Champion Loans.