Mistakes to Avoid When Looking for a Car Finance Option

By Eric Hamilton , Feb 12, 2020 10:20 AM EST
(Photo : Mistakes to Avoid When Looking for a Car Finance Option)

Buying a new car is exciting. Even before you have the cash, you've spotted the car, talked to the dealer and been out for a spin. It's as good as yours. New car smell and everything. But, slow down for a quick reality check. If you are thinking of taking out car finance you are going to be paying for this car long after the new car smell is gone and the novelty worn off. Perhaps, you can avoid some of the most common mistakes and find solace knowing you got a good deal on your car loan.

Don't Over-Share

Understand now the importance of not showing your cards too early. So many people over-share within the first few minutes and lose their chance of being offered a better financing option. Keep some details to yourself until you can see the lay of the land clearly. This includes disclosing exactly how much you can easily pay on a monthly basis. Letting your dealer know your affordability early puts them in a better position to work out how they can profit from you. So, negotiate calmly and carefully to be offered all the options and the right product.

Don't Underestimate Your Credit Score

If you have never ordered a credit report, you should do it now. Your rating has a huge impact on the amount of money you can borrow as a car loan. If you don't know your credit score, you leave yourself open to car loan providers with higher rates of interest or hidden administration charges. You'll miss out on the lower rates and benefits offered by good payers. Knowing your score means you can shop around more efficiently with a better idea of the rates you can expect. To see which deals you have available, it's best to explore car finance options online.

Don't Stop Negotiating

While it depends on your down payment as well as your credit score, you're likely to have more negotiating power dealing with smaller companies offering in-house financing options. But whoever you choose the APR (annual percentage rate) should be something you are absolutely sure about. This is the percentage of the loan you pay back on top of the capital of the loan and includes administration costs. It is divided by the number of months duration of the loan. Your monthly expected regular repayment will become your best friend or worst enemy, depending on your credit score.

Don't Look for a Long Term Loan

So many people make the mistake of going for a long-term loan for lower monthly payments. Even if you take the same loan for the same car at the same interest rate, you will end up paying more for a five-year loan as compared to a three-year loan. Of course, it comes down to how much car insurance you can find for the monthly payment you can make, but it is in your best   to go for the shorter term to save interest whenever you can.

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