Can College Kids Afford a New Car?

When Ford Motor Company approached me about a campaign tied to young adults buying their first car, I turned it into an interview with Greg Cerise, Ford Credit sales and marketing manager. here’s what we talked about…

2015 ford focus - can college kids afford a new car? -- ford credit interviewQ: College kids affording new cars? Is that even possible?

Yes, it’s possible. It’s important to put as much research and effort into financing as you put into choosing a vehicle. There are ways to start building a good credit profile before making large purchases, such as having a bank account, having and paying for a cell phone, paying rent and living for some period of time at the same address. One key tip is to have and follow a budget, so you know what you can afford.

Ford Credit has a college student purchase program designed to help students and recent graduates get into a vehicle. It includes special offers from Ford and Ford Credit. There are qualifications, including being in good academic standing for currently enrolled students, so grades are important. Talking to a local dealer is the best way for someone to get more details and assess their qualifications.

There are some great resources out there for learning about credit scores, building good credit, budgeting and auto financing. One of them is FordCredit.com, which has lots of information, including a budget calculator, a payment estimator, and even a way to select a vehicle and then take a credit test drive to see which financing options might work. The other is autofinancing101.org. This is a terrific resource of AWARE, which is an organization that includes auto lenders and dealers that is dedicated to helping ensure consumers understand auto financing.

Q: New or used? How do you counsel first-time car buyers to navigate that tricky question?

It depends on individual circumstances. It’s worth comparing the vehicles’ pricing, condition, details of any available financing or financing offers, how you plan to use your vehicle and what’s in your budget.

Q: If you do buy used, what should you be leery about, particularly in person-to-person car sales?

We recently worked with our own daughter on a certified pre-owned Ford vehicle purchase. Certified pre-owned vehicles are sold through dealers. These vehicles have gone through an inspection and certification process, and normally there’s a warranty attached – which helps take the mystery out of what you’re buying.

Here are a few specifics on Ford’s CPO program: Vehicles undergo a 172-point inspection and come with a comprehensive limited warranty and a vehicle history report.

Q: Is it better to have a big down payment and small payments, or save the money for emergencies? Also, how long should your car loan be?

The amount you put down can have an effect on monthly payments, the total cost of the vehicle loan; how fast you reach the point where your vehicle is worth more than you owe on it; and even getting approval for the loan. It’s important to talk over the options with the dealership; understand the complete cost of a loan, including interest and any fees or added warranty or service products; and make sure you have carefully budgeted for your payment. Keep asking questions until you fully understand your financing options.

The length of a car loan may vary depending on special financing programs, your planned monthly expenditure on a vehicle (don’t forget gas, insurance and other costs associated with owning a car), and how long you plan to own your vehicle.

Q: A lot of college students face an unknown job market when they graduate. They might get a $60K job, they might be unemployed. How does Ford Credit help in the latter situation? And if you do get a great job, can students pay off their car loan faster by sending more than the standard payment?

To answer your last question first, a Ford Credit loan may be paid off at any time without penalty. Consumers can pay ahead, if they want to, as well. Again, make sure you understand any financing contract, including prepayment options, before you sign on the dotted line – or the signature pad.

Good people sometimes run into tough situations. Anyone who finds they are unable to make their car payment should contact their lender and explain the circumstances. There can then be a discussion about options for making the payments. At Ford Credit, our goal is to help customers keep their vehicles if at all possible.

ford focus 2015
The 2015 Ford Focus. A good option for your first new car?

Q: Biggest mistakes you’ve seen college students make when picking a car?

My best advice would be to make sure you stay within your budget. Everybody who loves cars dreams of owning the biggest or fanciest or hottest vehicle, but it’s important to be realistic and willing to save and wait for that dream vehicle when your creditworthiness is strong and you’ve truly got the budget for it.

It’s not much fun having the hottest vehicle in town if you can’t afford to put gas in it or take your girl for a date in it.

Thanks, Greg! I have to share that my first new car purchase was a Toyota Tercel, while I was in college, after my first car, a Mazda RX4, had the engine burn out. And it wasn’t very sexy at all, but it got me to campus and home again afterwards!

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