With the global pandemic still raging on, you might find that it’s harder to get a car loan in 2021 if you are a first-time car buyer. There are a few reasons for this and we wanted to share the information that Ari Janessian – a YouTuber and auto broker – recently shared on his channel regarding obtaining financing on a car loan this year.
There are drawbacks to e-signing documents and online car sales
Since the pandemic hit, many dealerships are now resorting to conducting online car sales in order to adhere to social distancing guidelines. This typically means many of them are now having their customers e-signing the contracts for their new cars via DocuSign, which is a huge convenience for the customer, but not so much for the dealership.
Janessian says that the reason for this is that there has since been a rise in identity theft and illegal activity when it comes to signing documents online. As such, many dealerships are having to pay close attention to anyone applying for a loan.
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Forgeries happen as well
In addition to identity theft, Janessian says that a lot of unsavory customers have been forging paystubs in order to get approved for a loan. As a reaction to this, banks are now calling to verify the applicant’s employment as an added measure and asking the employer to send over pay stubs for employment verification as well. And while you most likely don’t partake in unscrupulous acts like forging paystubs or contracts, the unfortunate truth is that other people’s actions could affect you getting a loan.
How can you make sure you get approved as a first-time buyer?
If you’re a first-time car buyer and just started working at a job, then Janessian recommends that you work the job for at least two to three months, and for at least 30 hours per week, so that the bank can see that you have a job and a reliable source of income. Ideally, you would want to show the bank that you’re a full-time employee, as opposed to just a seasonal or part-time one, so that they know you’ll be able to make the monthly payments on time and for a longer period of time.
Know how much car you can really afford
Another key component when it comes to financing or leasing your first car is how much of a car that you can actually afford. Janessian states that most banks actually cap first-time buyers at $25,000, which is why you’ll see some of the best deals on entry-level Toyota Corollas and Camrys. The other factor is your credit status and history. If you currently don’t have any credit on file (current loans or credit cards), then you can always open up a Self account, which is a credit-builder account that you can deposit money into like a savings account.
That savings account is then reported to the credit bureaus so that they can see that you’re financially responsible enough to make payments on time, and ultimately, you can use the money that you saved in that account for your down payment on the car you plan to buy.
Having a down payment is also important
By saving up a nice down payment, you will in turn put yourself at better odds of getting a car loan as a first-time buyer. Not only do the banks want to make sure that you can pay your monthly payments on time, but they also like to see a nice down payment, so that they don’t need to lend you as much money. Typically, a 10 to 20-percent down payment is considered “good.”