By Dan Strumpf, AP Auto Writer
NEW YORK (AP) — Many college grads will need a new car to start their lives off campus. A dismal job market could make financing such a big-ticket purchase a challenge.
The recession has been tough on young people, with unemployment for 20 to 24-year-olds at 17.2% in April. That's much higher than the rate of 9.9% for the entire population, according to data from the Bureau of Labor Statistics.
But buying a car might be an expense recent college grads can't skip over. Here are some tips to help navigate the perils of car shopping.
For someone fresh out of college, buying an affordable car that is paid off on time is an excellent way to build credit. That will help down the road with buying a house, a more expensive car, starting a business or anything else that requires borrowing.
Before setting out for the dealership, it's a good idea for a buyer to check their credit history. This gives a car buyer the same information lenders use when they decide whether to give a car loan. Each of the three credit agencies, Experian, TransUnion and Equifax, allows one free credit report per year through their web sites.Shoppers just out of school aren't likely to have serious black marks on their credit. The bigger obstacle is more likely to be a short credit history, says Eric Hoffman, spokesman for Americans Well-Informed on Auto Retailing Economics, a group that represents automotive lenders and dealerships.
That means recent grads shopping for a car should be prepared to pay a higher interest rate or a bigger down payment to satisfy nervous lenders, who may also require a parent to co-sign.
"I would encourage people to have a few thousand dollars" set aside for a down payment, he says.
For many young people this will also be the first time they've looked at their credit report. It's an opportunity to make sure it's error free, even if there isn't much there yet.