When you’re looking to buy a car, financing should be one of your top priorities. Financing can make or break the deal when it comes to buying a car.
When car shopping, it’s important to get the best deal possible on your car itself and financing. That means paying as little as possible for the car and getting an affordable interest rate on your loan. However, many people make mistakes when financing that can cost them thousands of dollars.
In this article, we’ll look at some of the most common auto financing mistakes and how to avoid them so you can get a fantastic deal on your first car.
Considering the Monthly Payment Instead of The Total Purchase Price.
Don’t allow yourself to be talked into choosing a car based on its monthly payments. Make sure to figure out how much the vehicle will cost you over time. Look at both the purchase price and the cost of financing before you sign the dotted line. Don’t buy something just because the monthly payments fit your budget. Chances are the interest rate is higher, and you’ll pay more over time.
Taking out A Loan that Requires You to Make Payments for A Long Time.
Another risk of focusing too much on the monthly payment is that you may accidentally take out a loan that is too long. Five to six years is a reasonable loan term for automobiles, but if a dealer tries to extend it to seven or eight years, you should be wary. You may end up owing more than the vehicle is worth.
Letting the Dealer Define Your Creditworthiness.
When you know your credit score, you may be less likely to fall for a high-pressure sales tactic. Let the dealership know that you are aware of your credit score and that you will not be talked into purchasing a vehicle that isn’t right for you.
Not Considering Credit Unions as An Option.
Auto loans are available from many sources, including banks, credit unions, and auto manufacturers. Consider all your options when looking for an auto loan rather than limiting yourself to a single lender. Credit unions, in particular, often offer lower car loan rates than many other financial institutions.
You’ll need to open a savings account with the credit union to apply for a loan. But don’t worry—you don’t have to have a lot of money in your account to qualify for membership.
Not Making a Sizable Down Payment.
To lower your monthly payments, make a sizable down payment. Not only will this reduce your monthly fees, but it will also give you a shorter loan term and lower interest rate. Your total price to finance will go down if you make a down payment.