Beyond College: Affording a New Car

Written by  //  2013/03/11  //  Auto for Students  //  Comments Off on Beyond College: Affording a New Car

College seniors are busy finishing up their studies, and are looking for work and saying their goodbyes. By the time May rolls around, many students will have landed their first jobs, launching careers that may give them several decades of working enjoyment and financial satisfaction.

However, many students leave college in debt with thousands of dollars of student loans and credit card bills to pay down. The former can be tackled by consolidating these loans, the latter will become easier to tackle once the new job begins. Still, the adjustment from school to work may be a tough one, especially if new grads must buy a car to get from home to work each day.

Before you plunk down money to get a new car, there are some things to consider first. The last thing you want to do is to exacerbate an already tough financial position, therefore much care must be taken here.

A New Car? Really?!

Do you really need a new car? That is the question all recent college graduates must ask themselves. This is especially important if a trail of debt has followed you from campus to life beyond academia.

Taking on additional debt may only exacerbate the problem. You may be able to afford the new car, but you must determine whether your monthly car payments, insurance, taxes, tags and registration are costs that can be added to your current expenses. Gas is not cheap and basic maintenance will have to be addressed for the first three years of ownership. Luckily, the new car warranty will protect you if you undergo major repairs those initial years.

Making Motoring Sense

A new car becomes a more sensible option if your financial picture is a sound one. It may also help that you moved back home to live with your parents as you get your feet on the ground. If it isn’t a rent free agreement, likely you are covering your food costs and not much else. Make use of this time to get your finances in order.

Another reason why a new car may make sense is that you do not own a car or your current car is not up to the task of transporting you back and forth to work. Mass transit is a consideration if you live near it and is something that can take you to your job — otherwise a car is a must.

Understanding Your Credit

Where college graduates can get truly slapped is with their credit. You have seen the ads for those affordable subcompact cars priced below $15,000 and are interested. You also understand that low interest rate financing is available. Someone mentioned a $500 recent college graduate incentive on top of the cheap loan rate and you are ready to make a deal. Not so fast!

There is a matter of understanding who qualifies for zero- or low-interest rate financing. Unfortunately, few college students do. Those loans are reserved for people with excellent credit, holding a credit score of about 750 and above.

Do you know your credit history? How about your credit score? You can find out more about your credit history by obtaining the three credit bureau reports about you. Those reports are available from AnnualCreditReport.com and given free once annually. You may not even know that these companies — Equifax, Experian and TransUnion — have dossiers on you, but they do. And they are quite detailed. They also can be inaccurate. Obtain your three credit reports, review each one, notify the bureaus about mistakes present and pay the separate fee for your credit score. That fee is generally under $10. If your score is below 700 you may still qualify for a loan, but obtaining a favorable interest rate becomes more difficult.

Budgeting and Parental Assistance

Once you review your credit reports and look over your finances, you may feel that a new car is out of your reach. Then again, it may still be within your reach if you ask your mother or father to co-sign your loan. Under this arrangement, the bank can give you a favorable interest rate based on your credit, while making it possible for you to get the car. Co-signing does nothing, however, to build your credit as lenders see your parent’s name, not your own. Still, if you need a new car, then co-signing may be the way to go.

If you prefer not to have your parents directly involved, you may be able to buy a newer used car, finding that you can afford the monthly payments and get approved for a loan. Be careful here: the older the car, the more likely it will need major repairs sooner, rather than later. Buying a certified used car from a new car dealer may be the best way to go as you can get a car that is relatively new and one that comes with a limited warranty.

Wrapping Up

So, you know that you will be buying a car. There is one more thing to keep in mind and that is your personal status. Clearly, you want to avoid the trap of having to impress other people with your ride. Your heart may say, "BMW 3-Series" and your wallet may say, "Ford Focus." Although relatively the same in size, these vehicles are worlds apart. The former choice may make you look great, but leave you broke. The latter may not be so impressive, but it won’t drain your wallet either.

References
Bankrate.com: Car Incentives For Recent College Graduates — http://www.bankrate.com/finance/auto/car-incentives-college-grads.aspx
Auto Trends: How to Find a College Grad Car Deal — http://www.autotrends.org/2012/05/28/how-to-find-a-college-grad-car-deal/

Author Information
Jenny Sampson is a professional blogger that enjoys providing consumers with personal finance advice. She writes for TitleMax.biz, a leading Title Loan company offering loans for people with bad credit.

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