Car payments are likely the first regular financial obligation a young adult encounters. Previous to this, you may have paid small costs, but nothing as regular or expensive as car payments.
However, that does not make this a negative experience. Buying a car while in college,or shortly after may be one of the best financial decision you make.
The Benefits of Car Ownership
Car ownership teaches responsibility and financial planning. It keeps a person on budget and requires planning for the future. While these may sound like dull adult-world traits, they will go far in ensuring success in future endeavors. Moreover, these skills are learned while having greater liberty of movement. Having a car at your disposal is worth the cost, plus its just fun.
Buying a Car
If you’ve never bought a car before, the world of used car dealers and financing may be a mystery. Here are some tips for college students looking to buy their first car that will make the process easier:
- Understand the importance of building credit: As a young college student, you likely have no credit score because you have no credit history. Owning a car and making regular payments on it helps to build credit history. This will make financing larger things, like a house, much easier in the future. Be careful, though. Being negligent and missing regular payments will hurt your credit history, creating a low credit score. It is better to have no history than a low score, so stay responsible and on top of monthly car payments.
- Stay within a budget: When looking at cars, it is important to stay within budget. If the car payments will force you to eat nothing but ramen for the next five years, then this is a poor choice of vehicle. Be honest with yourself and the car dealership about the size of your paychecks, and don’t overshoot this amount with car payments.
- Don’t lease right now: While leasing a car may be a satisfying option because you may find yourself in a better car, this is not the best time to lease. As a young adult, it is time to build credit history. Leasing will not build credit for you the way a loan will (or at all). Settle for an older car as an investment in the future.
- Buy the car you need, not want: This may be one of the hardest tips for college students to apply when shopping. When buying a first car, there is the desire for the car to be, if not a dream car, at least one that is the envy of your friends. However, cost is more important than bragging rights when it comes to a first car. Focus on the car you really need instead of the one you want.
To summarize, stay level-headed when car shopping, but also don’t forget to have fun. Remember, there is no limit to test driving. Take a spin in that dream car. Then buy the one that is affordable.