Are you looking for a car loan? In this article we review some of the common mistakes made by people when getting a loan for a car, and offer some auto financing tips for you to use!
Top 6 Auto Financing Tips
Tip #1: Ask yourself – Can I really afford it?
Okay, so there is this sports car you’ve wanted to buy for a long, long time. But can you really afford it? If you’re not confident about your financial situation, if you don’t have a great credit score, then it’s better that you look for a more affordable option. Consider your financing options – this means getting pre-approved financing. Let’s talk about that next.
Tip #2: Getting pre-approved financing.
The most important thing to do when shopping for a car is to get a preapproved financing offer. This will give you a big advantage when negotiating for financing terms. What you don’t want is to be pressurized into accepting the first offer you get. So when you’re preapproved, this give you the freedom to buy any car you want within the set financial terms or benchmark.
Tip #3: Compare offers from multiple lenders.
One big mistake people make is to visit just one lender when financing the car. Don’t do that – shop at multiple lenders, compare their offers and choose one that you like best. Go to websites of banks, financial companies, credit unions and so on. Look for the best possible auto financing option. Every lender will have different standards with respect to loan-to-value ratio, down payments, credit score and income requirements. Make a note of their terms and opt for lender that you feel most comfortable with.
Tip #4: Don’t just consider the monthly payment.
Obviously, you will want a car loan with low monthly payment. But what about the period of the loan? Is it 6 years? That means you will end up paying more over the 6 years of the loan at a low monthly payment, than you would over 2 years of the loan at a high monthly payment. This is only a hypothetical scenario, of course. But the point is, don’t just focus on the monthly payment to be made when taking a car loan.
Tip #5: Never reveal your monthly budget.
The first question the sales executive at the dealership will ask you is, how much you can afford to pay each month for the loan payment. They will then make a note of this number and only show you the most expensive car that falls in this range. They may also suggest expensive but unnecessary add-ons. Be firm with your needs and stick to them.
Tip #6: Taking out an extra-long loan.
What you don’t want is to take an auto loan that is too long. A 5-year or 6-year car loan can be very expensive over the term of the loan. Longer the period of the loan, higher is the risk borne out by the lender. Also, the monthly payments can add quickly and cost you tens of thousands of dollars in interest charges.