Financial values and expectations differ by generation. The Baby Boomer generation was defined by a more materialistic philosophy, fiscally focused and motivated. Millennials, on the other hand, have completely different financial views and principles.
Their strong driving forces are less focused and more flexible. And while millennials are financially savvy, their money management strategies revolve around unique generational challenges.
These are just some of the financial challenges impacting millennials and how they employ their financial resources:
Despite these concerns, millennials are quickly becoming the largest generational cohort since the Baby Boomers in terms of purchasing power, and many are looking to buying their first car. A report published by JD Power forecasts that millennials will become the fastest growing demographic, becoming a major buyer segment among vehicle buyers.
For the money-savvy millennial looking to buy their first car, here are some things to consider.
Before the car search can begin, you should know ahead of time where you stand in regards to your financial situation.
Knowing your budget and existing credit accounts, and checking your credit score, are crucial to acquiring a car loan. These financial factors can significantly impact your auto loan’s interest rates.
Before reaching out to auto loan vendors regarding financing, ensure that your credit situation is reported accurately. Have any errors fixed beforehand as a faulty credit score will directly impact your negotiating power when seeking out a lower auto loan interest rate.
Technology has been a keystone figure in how millennials exert their influence and buying experience.
In the context of buying a new car, technology can put millennials in a stronger negotiating position. Not only can technology provide millennials a firm price quote for their preferred quote, but doing online research and shopping around for the right auto loan vendor can also assist in helping millennials find the best interest rate.
There are many online tools available that compare multiple loan offers from numerous vendors. It’s essential for millennials to shop around before committing to an auto loan to ensure they save the maximum amount of dollars over the life of their car loan.
Auto loans aren’t open-ended. Unlike multi-purpose personal loans, the average loan term for millennials who financed a new car was around five years, with some auto loans averaging seven years.
If you’re already balancing student loan payments and credit card debt, this fixed amount of time to pay back your auto loan may cause significant damage to your credit score.
Use and play around with an online loan calculator. This will help you determine what monthly payments you can afford as your monthly payments, providing insight into how much you can borrow for a car loan.
Remember, the less you borrow, the more money you will have to invest in life’s other major milestones, such as buying a house.
The more money you have in your savings account before seeking out financing terms for an auto loan, the more you will improve your ability to negotiate for a competitive and flexible car loan. Having more money for a down payment will also contribute to a shorter loan term and more money in the end.
Saving a significant portion of the cost of the car enables you to have a better idea of what price points are available to you when shopping for your desired car.
It also ensures you have the overall financial capacity to pay back whatever debt you incur when buying your car.
Even if you’ve created a budget and determined your credit score, you may have to deal with the fact that your current established credit still leaves you with a car loan that has unfavorable high-interest rates.
If have an unacceptably thin credit file and limited credit history, one option is to consider the possibility of using a cosigner. A willing cosigner with good credit, usually a parent or guardian, can enable you to get a good interest rate and lower monthly payments.
Having a cosigner on your auto loan can also be beneficial in helping you save money and establish a strong credit history.
Before buying your first car, it’s important to be an informed buyer. Having a plan for getting your first car loan is a financially savvy solution to accessing auto financing with favorable rates.