3 Financing Mistakes That Cost You Money

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3 Financing Mistakes That Cost You Money

3 August 2015
 Categories: , Blog

Getting a new car is an exciting prospect, but figuring out how you're going to pay for it isn't. While it would be great to pay for a car in full, it's just not a reality for most people, which means other options need to be explored. Many people opt for financing because they own the car for good once their payments are finished. Financing is also a great option because it allows you to essentially use the bank's money to pay for your car, which frees up any extra cash you may have. While this all sounds great in theory, many Americans make the same mistakes over and over when it comes to financing, and it's time to break the cycle.

1. Worrying about the monthly payment more than the purchase price of the car.

Everyone has a budget, so it's only natural that you have a limit for what you can spend on the car monthly. However, focusing too much on the monthly payment is an easy way to get trapped into paying more interest. A 5 or 6 year loan might make the monthly payments lower than a 3 year loan, but you're also paying more interest in the long term. Cars are notorious for depreciating quickly anyway, so you might as well not pay extra interest on a poor investment.

2. Settling for the dealer's financing option instead of shopping around.

Your credit score is one of the biggest factors that determine the deal you're going to get, which might lead you to believe that every bank will give you the same kind of deal. In reality, every bank has loans that differ in their lengths and terms. If you're not educated about different financing options, then dealers can take advantage of that ignorance by presenting you with a long-term loan that has a high interest rate. Before you start car shopping, figure out what your budget is, and start shopping around at your own bank and local credit unions in addition to car dealerships.

3. Not knowing your credit history until you're about to make a deal.

Not being knowledgeable about your own credit history is one of the easiest mistakes to avoid. If you don't know your credit score and your credit history, you have no negotiating power when financing your car. If someone quotes you a high interest rate, you have no way of knowing if you really deserve it or not without knowing your history. Ordering annual credit reports and keeping track of your credit score are two of the easiest ways to ensure you get the fairest deal.

Being aware of common mistakes to avoid when you're financing your car will not only help the process go smoother, but it will also help you get the best deal possible.

For a professional car dealership, contact a company such as College View Auto Sales.