Questions about financing a car at 19

You can buy a fantastic car for $1500 - $2000 cash.

One of the most critical points is,

• With insurance, you will only be paying third-party insurance (the legal minimum in your area). This will absolutely slash your monthly costs.

The other benefits are too many to mention. Repair, tire, etc costs are incredibly lower. Regarding the price, it actually won't cost you anything, when you sell it in a year or two you can craigslist it for the same 1500 bucks.

Yet another HUGE benefit is that if you happen to ding it - tap a mailbox, gutter the wheels, tap a lamppost - it means nothing. You just smile and carry on and think how clever you were not to be driving a hyper-expensive car.

Yet another benefit is you can go do this today, none of this waiting until December business.

(There's no realistic way in OP's situation to spend more than say $3000 on a car. But there's no need to spend more than $1500.)

Fattie is correct. It is always best to avoid financing a vehicle. Cars are not an investment and nearly always depreciate very quickly. The exceptions are older, well-maintained vehicles and some collectibles. Our family has 3 cars which now have more than 200K miles each. Our cars are not fancy, but we take good care of them and they work just fine. We owe much less on our house and have much more in savings because of our car buying decisions.

There are additional costs incurred when financing a vehicle, which means that individuals who finance pay more for cars than they are actually worth. And those additional costs do not improve the vehicle or increase the resale value. You will be much better off if you never get on the auto loan carousel. Instead, make car payments to yourself until you can afford to buy the car you want - or better yet - the car you need. After your first purchase, continue making car payments to yourself so you can purchase another car down the road.

If you decide to finance anyway, these are some important points to keep in mind.

1. Never finance a new car - financing a new car is a very bad idea in general, and even worse for a young driver.
2. Put money down - if you finance a vehicle and do not make a down payment, you will almost definitely be 'upside-down' on the loan, i.e. you will owe more than the car is worth.
3. Talk to your bank or credit union about financing BEFORE you shop for a car. See what kind of loan terms you qualify for and determine what it will really cost.
4. Choose a term of 3 years or less - if you can't make the payments on a 3 year car loan, change your expectations. You may keep a car for many years, but it is not wise to be locked in a long-term relationship with a vehicle.
5. Do the math - do NOT just consider the monthly payment. Make sure you understand how much you will pay in interest and fees. You can do the interest and payment calcs using Excel or an online loan calculator.
6. Consider the insurance costs - if you finance a car, the lender will require you to carry insurance to protect the asset associated with their loan and will probably require you to have a low deductible. If you did not make a down payment, you may be required to have GAP insurance as well. Insurance costs for young drivers are high. Talk to your insurance agent so you know how much your insurance will be.
7. Know the value - before you drive a car, use sources like KBB, NADA, etc. so you know the actual value of the car. Read about the different types of title and the impact on value. Financing a salvaged vehicle is not a good bet.
8. Government fees - You will have to pay taxes, title and license fees over and above the base price of the vehicle. You should be able to look these up for your state and locale pretty easily.
9. Dealer fees - If you buy from a dealer, they will charge other fees. Those should be minimal, but some dealers add lots of bogus fees, so watch out for those. Make sure you know what the 'out-the-door' price is.
10. Only look at cars in your price range - if you follow the previous steps, you should be able to determine your max base price. Don't let a dealer show you cars out of your price range. They will tell you they can get your payment down to what you can afford, but this is done by extending the term of the loan.
11. Get a mechanic's opinion - Have a qualified mechanic that you trust take a hard look at the vehicle to make sure it is mechanically sound.
12. Beware dealer financing - Dealers make a LOT of money on financing and often have fees and terms that are unfavorable to the buyer. Get all of the terms of any dealer financing options in writing. Compare their terms with the terms from your bank or credit union and determine the best option for you before you sign anything.
13. Don't get emotional - the last thing you need is an emotional attachment to a car. Be objective and sensible. You're buying a hunk of metal. You'll make better financial decisions about it if you rely on logic and reason.