Shopping for a car can be an exciting experience, until you are struggling on meeting your repayments after some time. In order to avoid getting into a deal that you will regret, these are buying mistakes you should avoid.
Not doing your homework
If you seriously want to get the best value for your money, you should take the time to study the auto loan industry. Failing to do so can mean you are gambling your hard-earned cash. The internet alone can give you a lot of information and tips to find the best car deal. However, you shouldn’t limit your search online. You can also visit dealerships and other companies wherein you can obtain relevant information regarding car loans.
Buying new instead of used
It’s not saying that you should never buy a new car, but you should also consider if it’s worth the cost. You should keep in mind that your new car depreciates a great deal in value the second you drive away. However, in buying a used car, you can avoid this initial drop in value. It’s not saying that you have to sacrifice quality and safety. On the contrary, you can still obtain the same safety features by purchasing the same car model that is a year older for example. Nowadays, most warranties are transferrable to the new owner, so you won’t have to worry too much if you encountered a problem. In addition, many older car models contain the same level of safety as with newer vehicles.
Looking at the monthly payments alone
In order to sell, dealerships attract customers by offering low monthly payments, and many are fooled thinking that they are getting the cheapest rate. However, monthly payments are not the whole story. What you need to determine is the actual price of the car and how much you are paying in interest. You should also consider the length of the loan, because the longer you stretch your payments, the higher you will have to pay all in all.
When negotiating, always negotiate for the price of the car. In order to save money, obtain the shortest possible loan, if you can afford it. Also inquire if the company allows you to pay a higher monthly payment or pay off the loan in full without early repayment penalties.
Including add-ons in your loan is almost always a bad idea. From alarm systems, CD stereo, chrome wheels, window tinting, and leather seats, these add-ons will be offered by the dealership in order to make more money within the transaction. However, these extra features are often overpriced and don’t actually add value to the car. If you’re still interested in these add-ons though, might as well find a deal outside the dealership.
Financing with a dealership
Typically, financing with a dealership can be more expensive than getting financing from credit unions or auto lenders. Part of the buying process involves comparing rates among all lending sources. However, there are situations when financing with a dealership is a better option, such as if you have bad credit.