A car is a pretty significant purchase. If you can’t pay for it in cash, an auto loan might be your best option. But it’s extremely important that you do your own research so you can avoid mistakes that could cost you thousands of dollars. If you intend to start looking for a new or used car to purchase, here are some common auto financing mistakes you need to avoid.
Not doing your research
People who are thinking of purchasing a car should take their time to research different models and check the price variations for each. Don’t just pick a car because it’s within your budget. Instead, look around and compare the prices of new and used cars in dealerships around where you stay.
Focusing on the vehicle’s monthly payments
Car loans often get measured in monthly payments – but that’s not the only number to consider. Instead of looking at the monthly payment, you need to look at the total cost of the loan. If the monthly payment is low, but the interest rate is high, and the duration of the loan is really long, there’s a good chance you’ll end up putting a lot of your money toward interest payments.
Asking the dealer to assess your credit
Don’t let the dealer define your creditworthiness. When you don’t know what your credit score is, you may end up believing whatever the dealer says. As a consequence, you may possibly find yourself in a very unfavorable deal. That’s why it’s important to check your credit score before you start shopping for a car.
Opting for a long loan term
For car financing, it is better to choose a shorter loan term if you can afford it. It will really help save you money in the long term. A longer auto loan term may be more affordable when you look at the monthly payment. But, over the duration of the loan term, it could end up costing you hundreds, or sometimes even thousands, of dollars more! You may also owe the lender more than the vehicle is worth because of the interest rate.