Your First Auto Loan - InTouch Credit Union

Is it time to trade in that set of wheels you inherited from your older sibling? Or do you need a reliable new car for your job? 

If so, maybe it’s time for a young adult rite of passage: taking out a loan to buy your first car. You’ll save money and headaches if you do a little research up front and arm yourself with good information. 

First, check your credit record. If there are any errors that have lowered your score, get those corrected. The better your credit score, the better your chances of getting a loan with lower interest. (Check your credit for free at, a federally authorized site, or, if you’re a Momentum or Prime Checking accountholder, you can get a credit report for free!)

Next, decide on a down payment. The more you pay up-front, the smaller your loan, and the lower your monthly payments. Many financial experts recommend putting down at least 20 percent and getting a loan for five years or less.

Establish a budget. Visit your bank or credit union to find out how much you can borrow, given your credit record, down payment, and income. You don’t have to borrow the entire amount, but you’ll have a ballpark upper limit for your purchase. Another advantage: by starting at a financial institution, you’ll have a point of comparison, and more bargaining power, when the dealer offers you financing. “Better to talk to your credit union, bank or insurance provider (some offer financing options) and line up your financing in advance,” advises the Kelley Blue Book website. “You can always go with the dealer option if it’s competitive, but never approach it as if the dealer is the only money game in town.”

Factor in insurance. Your lender will ask you to maintain physical damage insurance for the full term of your loan. Depending on your age and driving record, this cost can be significant. Consider this as you decide what you can afford. 

Run the numbers. InTouch Credit Union’s Loan Calculators factors in your interest rate and terms to figure out your monthly payment. Or work backwards from a monthly payment you can afford to see how much car you can afford.

Consider a co-signer. If you’ve just started your first job, and haven’t established a credit record, your options may be limited to a high-interest loan. If your parents are willing to co-sign the loan, you’ll likely qualify for better terms.

Once you’ve done your homework, head to the dealership and start test driving! When you find the car that works for you, you’ll be ready to finance the purchase with confidence.