Car Credit Kingston – Tips for First Time Car Buyer’s Auto Loans

You’re sick of driving your dads beat up hand-me-down. And begging your mum to take her car out for a spin is getting old.

It’s time to buy your very own car!

Read through our Frequently Asked Questions for fist time buyers before you take some potential vehicles for a test drive.

What do you need to bring with you to the dealer? Pay Stubs – For how long?

Taking your employment paystubs to a dealer when you’re looking for a car brings you one step closer to your purchase. The most recent pay stubs give your dealer an accurate picture of your financial stability, by highlighting your regular income and salary for the year to date.

Additional paperwork required by your dealer will include:

  • A copy of your drivers license (make sure it shows your current address – if not have it updated),
  • VOID cheque from the account you’d like your payment to be debited automatically,
  • A copy of the insurance papers for your current vehicle.
  • If applying for special grad programs, you’ll need a copy of your degree or diploma

What should I ask about financing? Should I take copies of my credit scores or bills?
The person reviewing your financing at the dealership will often request your credit report for you from the appropriate agencies while you are there.

To provide an idea of your financial situation, you’ll likely want to ask your dealer if you can:

  • Pay your car loan early without penalties
  • Agree to a fixed interest rate throughout the car loan term
  • Find approval with or without a cosigner
  • Inform your dealer your bank providing finance, the interest rate and term of  your loan they can likely beat it.

The only information you will likely want handy will be:

  • Your balances and monthly payments on any other loans
  • Fixed costs including rent

Which types of interest rates are normal for someone with a credit score of approximately 600?

Interest rates change every week, and will usually be lower for new vehicles then they are for pre-owned ones. At present, a reasonable interest rate for someone with a credit score of 650 or higher is 6% (or 5.99% as advertised). Some new car loans offer an interest rate as low as zero percent (or 0.99%), however higher depreciation on new cars will eventually cost more than your interest savings when purchasing a reliable used car.

My father told me I shouldn’t agree to a loan for more than 48 months. Is this true?

In an ideal world, your father is right. However, this really depends on your budget and the car you intend to purchase. Most people find that their first car suits their needs for the next five years, before a replacement is needed for a change in lifestyle or financial situation. And then they can be more flexible in seeking out a bit longer of a term loan.

Be open to a loan term that allows you to purchase the car your want within your budget, and have it paid off before you decide to upgrade to your next car.

Will I Have Difficulty Securing My First Auto Loan?

When securing your first car loan, find a dealership that specializes in guaranteed first time car buyer auto loans. At Car Credit Kingston, our auto loan advisers review your financial situation to create a program that will guide you in the right direction towards securing a loan. You’ll wave goodbye in your first vehicle as you take to the road.

I would like to buy a new car and I earn 39K a year. Is it reasonable to secure a loan for a car priced between 18K-25K?

Buying a shiny new car is often irresistible. However, securing a loan for your new vehicle will depend on your financial situation. In short, you’ll need to be realistic!

At Car Credit Kingston, we review your overall transportation needs and provide you with reliable new and used car options. Determining how much you can afford will depend on a review of your overall budget, including your fixed monthly payments on rent, the new car loan payments, student loans and other loan payments including the minimum payment on your credit card.

Lenders will evaluate your TDSR (Total Debt To Service Ratio), which should come to 35-45% of your gross monthly income before taxes. To calculate your TDSR, add up your fixed obligations before including the new car, and calculate 45% of your gross income per month. Subtract your total monthly expenses from the 45% of your income, and the amount remaining is an affordable monthly estimate of car loan repayments for your first car loan.

Take a look at this example:

Monthly Obligations:

Rent: $800

Student Loan: $120

Visa Card Payment: $75

Total:  $995

45% of gross monthly income if earning $39,000 a year = $1462

Now lets see what’s left over for a new car payment and insurance:

$1462 minus your obligations of $995 = $462.

In the above example, Car Credit Kingston loan advisers will help you to secure a first time auto loan for a car valuing $20,000. Not bad for your first set of wheels!

No obligation! Book a review with an auto loan adviser today

At Car Credit Kingston, we ensure buying your first car is exciting as it should be by guiding your through our First Time Car Buyer’s Auto Loans process with ease.

Click here for your obligation free appointment, and an auto loan adviser at Car Credit Kingston will review your credit report, discuss your budget and help you to secure your very first car loan.