Getting an auto loan can be an intimidating process for someone new to the wide and complicated world of financing. It can be too tempting to rush into a less than optimal auto loan just to get a vehicle that the borrower wants. With that in mind, here are some of the most common mistakes made and how to avoid them.
1. Not Putting a Down Payment Down
A down payment today is optional, but it's almost always best to put down some down payment. It vastly reduces the amount you'll pay in interest over time, and it makes it easier for you to actually secure a loan when you're applying.
2. Getting Extras Rolled Into the Loan
Did you want an additional warranty? Maybe some repairs on a used vehicle? Extras should usually be paid for separately rather than rolled into the loan. When extras are rolled into the loan, everything becomes more expensive because you're paying interest on it.
3. Not Considering Dealership Loans
Many people head straight to the bank when looking for an auto loan when they really should be turning to their dealer. Auto dealerships maintain relationships with banks and local credit unions to offer loan products directly from their dealership, often at substantial discounts.
4. Failing to Check Trade-In Pricing
When you trade in a vehicle that you already owned, you'll get a credit on your lending application. This credit will adjust the amount of your loan. But keep in mind that mistakes do happen. You should make sure that your vehicle has been listed at an appropriate market value.
5. Not Understanding the Terms
The terms of a loan is the amount of money you'll need to pay over a specific time. Your loan terms affect your financial status in two major ways: the total amount you pay, and the monthly amount you pay. If your loan terms are longer (five or seven years), your monthly payments are lower but you pay more ultimately in interest. If your loan terms are shorter (two or three years), you pay more each month but you pay less overall.
6. Forgetting to Negotiate With the Lender
Many people negotiate with their vehicle price but don't realize that they can negotiate with their loan, too. Apart from negotiating the terms of the loan, you can also negotiate interest rates if your credit is good enough.
Always discuss your auto loan thoroughly with your lender or dealership. They want you to be happy with your loan, too -- they know that if you get a loan you can't afford, you won't be able to pay it. You can trust them to direct you to the proper loan product for you.
For more information about auto loans, visit http://www.automaxnm.com or do an online search.