1st Time Car Buyers

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AWARE Articles:

Pop Quiz for 1st Time Car Buyers
Auto Financing 101 For Students Planning to Purchase a Vehicle

Shopping for Your First Set of Wheels? Take This Pop Quiz to Find Out if You’re Ready

If you are considering buying a car for the first time, you might not know where to begin. Making such a major purchase is most likely the first step in your financial life, so it is very important to take it seriously.

According to AWARE (www.autofinancing101.org), 6 out of 10 of us are doing our homework on the cars we want to buy – we learn about colors, options, prices and ratings. But 3 out of 4 of us don’t check our credit score or research our auto financing options before heading to the showroom.

Are you prepared to take the first step of your financial future? Take the following “pop quiz” to see if you’re ready.

  1. Do you have a budget? If you don’t already have one, now is the time to create one. This will help you determine how much car you can actually afford (to estimate a monthly payment for the car itself, check out the calculator at www.autofinancing101.org). Don’t forget to factor in vehicle-related costs outside of the car payment, such as insurance costs. Insurance premiums for younger drivers can be significantly higher – sometimes as much as the monthly car payment itself. Other costs to consider include gas, maintenance, and taxes, which can all be significant, especially if you forget to plan for them.
  2. Have you pulled your credit report? Your credit history may affect the finance rate you are able to secure, so it’s a good idea to get a copy of your free credit report before heading to the dealer. This way, you’ll know what creditors will see before they do. And it will give you a chance to try to correct any errors on your report. Go to www.annualcreditreport.com for yours.
  3. Have you shopped around? Do some homework before you decide which car to buy and where to buy it. Call your bank or credit union. Talk to multiple dealerships. Print out all quotes and keep them in a folder that you bring with you when you shop for the car. In the end, however, whether you finance through your dealer or elsewhere, there are typically no penalties to refinance if you’re not satisfied.
  4. Do you know how finance rates are determined? Vehicle financers use a number of factors to determine the finance rate they’ll offer you. Typically, they review your credit score, which is based on an automated analysis of your credit history. Other factors that may affect the financing offer include: the price of the vehicle you’d like to purchase, the availability of manufacturer incentives, the amount of your down payment, your debt repayment options, and the length of the finance contract. The rate you’re offered may be negotiable.
  5. Is there someone you could ask to be a co-signer if needed? If you’re under 18, are currently not employed, do not have a credit history, or your credit history is not good, you may need a responsible person to cosign the finance contract for you.
  6. Do you know the difference between leasing and financing? Know what an APR is? Credit insurance? Guaranteed Auto Protection? You need to educate yourself on these terms, and understand the value and price of aftermarket products. If you don’t want something, don’t sign for it. A good glossary of terms can be found at www.autofinancing101.org under “Resources.”

If you answered ‘no’ to any of these questions, go back and hit the books before you buy a car or truck. It is crucial to be vigilant about understanding the vehicle financing process, especially if you are at the beginning of your financial life. If you make mistakes along the way, they can follow you for years. Get smart before you sign on the dotted line.

These tips were brought to you by AWARE, a group of vehicle financing industry leaders that have joined together to enhance consumer understanding about the auto financing process. For more tools, calculators, and other information on vehicle financing, visit the AWARE Web site at www.autofinancing101.org.

Auto Financing 101 for Students Planning to Purchase a Vehicle

High school and college students know that mid-terms, finals, projects and papers require diligent research, studying and preparation. The same goes for buying a car.

Understanding how the vehicle financing process works should be the first step for high school and college students thinking about buying a new or used car or truck. Knowing the ins and outs of vehicle financing will give students and their parents the tools, resources and knowledge to ensure that their purchasing experience builds upon their long-term financial goals. AWARE, a nonprofit group that educates consumers about the auto financing process and ways to make informed financing decisions, advises that its Web site - www.AutoFinancing101.org – be ‘required reading’ for both students and their parents.

AWARE recommends that young car buyers and their parents make some key evaluations before starting the car buying process:

  • Know what you can afford: Determine what type of vehicle best meets your needs, set a realistic price range, and develop a comprehensive budget for owning and operating your car or truck.
  • Decide how you’re going to pay for it: Some first-time car buyers purchase a used car or truck with cash they’ve saved or borrowed from a family member. Others, however, work on their own or with their parents to finance a vehicle through a bank, credit union, or at a dealership.
  • Review your credit report: To know what creditors will see, obtain a free copy of your credit report. You have access to three credit reports a year -- one from each of the three consumer credit reporting companies. Space out requests over the span of a year so you can see ongoing changes to your credit record and check if there are persistent problems. Correct any errors you find.
  • Make your payments on time: Late or missed payments incur late fees and can even cause your vehicle to be repossessed, permanently. A bad payment record will also appear on your credit report, damaging your ability to get affordable credit in the future.
  • Comparison shop: The auto financing industry is highly competitive, so use the marketplace to your advantage by comparing annual percentage rates and other important financing terms from multiple sources, such as banks, credit unions, finance companies and auto dealers.
  • Know Your Stuff: Make sure you are familiar with common terms you’re likely to hear or read in the course of purchasing or financing a vehicle, such as down payment, fixed- and variablerate financing, and on- and off-site financing. Many of these terms can be found at www.autofinancing101.org/resources/glossary.asp.
  • Negotiate: This finance rate you are offered may be negotiable, as well as the price of the vehicle.
  • Understand the value and price of optional services: Examples include credit insurance, guaranteed auto protection, and extended service contracts. If you do not want such services, do not sign for the.
  • Read any contract carefully before signing it: Ask questions about anything you do not understand.

These tips were brought to you by AWARE, a non-profit organization seeking to build a greater understanding about how auto financing works. AWARE is supported by leaders of the vehicle financing industry, and is perhaps the only resource that focuses exclusively on auto financing education in materials, a Web site, and other educational offerings that are entirely free of marketing, advertising, or sales efforts. Visit www.AutoFinancing101.org for financing calculators, tips, and other free educational materials, which are available in both English and Spanish.


Recognizing the need for consumer education, automotive industry leaders have formed AWARE (Americans Well-informed on Automobile Retailing Economics), a collaborative industry effort to provide consumers with information, tools, and other resources to better understand the auto financing system.