There’s a lot of advice out there about choosing the right car. It’s important that you take your time and pick a car that suits your needs, but also one that is reliable and cost-effective to run. But it’s not just the car itself that you need to think about, it’s the financing options. If you’re lucky enough to have the cash to spare, you can buy the car outright and you won’t need to worry about taking out a loan. Unfortunately, most people aren’t that lucky and you will need to get a loan to pay for the car. That’s not really a problem, as long as you get the right loan. But if you make the wrong choices about financing, you could end up paying a lot more money than you need to for your car. These are some of the biggest car loan mistakes you need to avoid.
Underestimating Total Monthly Costs
When you are looking at a loan agreement, it will tell you how much you need to pay on the car each month. If you can afford it, sign away. However, it’s not just the repayment that you have to think about when you are calculating whether you can afford the car or not because there are other costs to bear. For example, have you looked at the monthly insurance costs and the fuel efficiency? A lot of people assume they can afford the car because they can afford the monthly payment, but they soon realize that the overall cost of owning the car is too high. A surprisingly high number of cars are repossessed (check out www.titleloanser.com for some statistics) and it’s often for this reason. Before you decide on a loan agreement, make sure that you can cover the full cost of owning the car comfortably.
Giving Away Too Much
If you walk into a dealership and tell them exactly how much you can afford to spend each month, that’s how much you will pay. You have no room to negotiate the price down because they already know that you can afford it, so play your cards close to your chest. This is important if you are trying to part exchange your existing car as well. If you mention it straight away, they will just push the price of the new car up and you won’t make a very big saving. What you should do instead is negotiate the price of the new car until you are happy, and then let them know about the part exchange. If they don’t offer you a good deal, don’t be afraid to sell the car yourself if you can get more for it.
Not Knowing Your Credit Score
Your credit score is always important when you borrow money, and if you don’t know yours, you’re in a bad position. It puts the dealer in the driving seat when it comes to interest rates and loan terms, but if you know for a fact that your credit score is great, you have a bargaining tool to use. It’s also important to know if your credit score is terrible because it may be better to work on improving it before buying another car. Visit annualcreditreport.com to check yours before you start visiting any dealerships.
If you can avoid these 3 mistakes when taking out a car loan, you’ll get a much better deal on it.