Buying a new car can be an exciting experience. Researching all the different makes and models and test-driving each potential option, then choosing the one you think is best for you and getting behind the wheel of your new ride while smelling the unmistakable new vehicle scent- buying a new car is fun.
Nevertheless, there are some mistakes you can make when it comes to the financing aspect. If you aren’t careful, you could end up spending more than necessary on your car loan. By paying much attention to the best deal for a car, you can easily forget to consider the best deal for an auto loan. Before taking that loan to finance your next vehicle, here are the common mistakes to avoid.
1. Not Determining Your Credit Score
Your credit score can help ensure your dream of owning a car becomes a reality. Knowing your credit score will help you easily identify the loan terms you qualify for and what to expect during loan negotiations. The number that determines a good credit score varies among lenders, but the higher, the better. With a higher credit score, you will easily find an auto loan with lower interest rates.
2. Not Comparing Auto Loans
As a prospective auto loan applicant, you must do comprehensive research before choosing a vehicle. Although finding the best deal on your new car is crucial, it’s even more critical to plan reasonable and affordable financing. In most cases, buyers focus on getting a car and don’t take enough time to find the best auto loan deal. Also, some people get excited when dealer financing gets mentioned. However, you should ensure you check all the available options to see the benefits each lender offers and then choose a deal with the best interest rates and terms that suit your scenario.
3. Not Choosing the Short Term
Although spreading out a loan over an extended period ensures lower monthly installments, in the end, you will pay more than necessary. Go for an auto loan with a short repayment tenure. A short-term loan will enable you to pay less interest and reap maximum loan benefits. You can use an automated EMI calculator to determine the appropriate option for you. There are numerous car loans available in the market, so finding the best one for your needs will be easy.
4. Choosing the “No Down Payment” Option
Although a “No Down Payment” deal sounds lucrative, it’s a trick to lure shoppers. This deal means “less now, much later.” “No Down Payment” deals mean that your future EMIs will be high, and thus, your interest outflows will be high. In addition, there are hidden charges that loan applicants usually forget to include in the equation.
5. Focusing Only on EMIs
Some auto loans have extended tenures and smaller EMI amounts, while others don’t. Even though the EMI sounds lucrative, it doesn’t mean that’s the best deal for you. Ensure you look at the big picture and determine how much interest you will pay in total before making a decision solely based on the EMI amount.