Car Finance for First-Time Car Buyers

Buying a brand new car is always a big step. They say that after a house, a car is the second most expensive investment you will make. It is important to be aware of how to secure a car finance solution to make the process easier.
Most lending institutions offering car finance solutions use three Cs to evaluate your application. Knowing this will improve your chances of successfully getting a loan. The three Cs are as follows.
Collateral
This refers to the vehicle under consideration for the loan. Most lending institutions have policies and guidelines regarding how much they can and are willing to lend you for a particular vehicle. For example, one firm may give you more if you are getting a certain make from an automaker.
Capacity
Lending institutions use this term to refer to your ability to repay the debt. Some of the things they take into consideration include the length of your employment, gross monthly or annual income, and your current debt and assets. This and the following parameter are essentially a lifestyle check to find out if you are worthy of a loan.
Most firms will grant a loan only to those who are working under a current employer for a year or more. You improve your chances of securing financing if you have a steady income and receive pay by the hour. Self-employment usually makes it slightly more difficult to obtain one. The figure they use for gross monthly income usually ranges from $1500 to $2500.
Note that lenders may also calculate for your debt to income ratio before approving your application for a car finance solution. To do this, they divide the sum of your monthly liabilities and obligations (including rent, insurance, and utilities, among others) by your gross monthly income. The ratio must be in the range of 30% for conservative loans and up to 65% for aggressive loans.
Character
This refers to your credit history and is the most significant determinant in the approval of your loan. Lenders usually dig into every aspect of your credit report. They review everything from your payment history on revolving and installment accounts, to your tax payments, and a range of other considerations.
It will help to do an initial review of your credit report. You are entitled to a free copy of this once a year from the three national consumer-reporting companies. The three companies are Equifax, Experian, and TransUnion. You can order a copy by visiting a central website, calling a toll-free number, or via a mailing address - all free of charge.
Calculate how much you can afford before being attached to and committing to a vehicle. A number of loan companies offer free auto finance calculator on their websites. All you have to do is fill out the form with the necessary information and the automated system will determine how much you can afford.
An auto finance calculator is extremely useful, as it will give you a realistic projection of how much you will have to pay per month. It will help you know whether the car you are dreaming of is out of your league or not. After determining this, you can decide whether you can stick to your dream vehicle or start considering something a little less pricy.