Going into the car application process, there are several common mistakes that you should do your best to avoid. They can hamper your ability to get the best deal for yourself, and cost you money and peace of mind in the long run. Here are a few of those common mistakes.
Lack Of Preparation
There are several steps that you should take before you apply for a car loan. From knowing your credit score to outlining your budget range, you need to understand where you sit financially before initiating the car loan application process. Having an intimate understanding of all of these factors will give you the best opportunity to lock into an ideal loan for your dream car, and ensure that you don’t get taken advantage of by a dealership that doesn’t have your best interests at heart.
“Shopping Around” For Auto Financing
Getting and weighing several financing options might seem like a good idea at first, but seeking financing from multiple dealerships is a mistake that many people make, and it can end up causing severe harm to your credit. Even if your credit is good, having multiple credit checks in a short time-frame can make you appear to be credit seeking and lower your score substantially. Your credit information is private, which is why you only want to work with a credible company that has positive online reviews.
Focusing On Monthly Payments, Not Total Cost
When most people account for their car loan budget, they only take the monthly payments into account. While this is easiest and most logical when making your monthly budget that covers everything in your life, it may not be the best idea when considering your long term financial plan.
Lower monthly payments may fit in with your liquidity, but when paired with higher interest rates and/or a longer loan length, may cost you hundreds or thousands more dollars over the life of the loan. Taking the total loan cost that works best for you, even with slightly higher monthly payments, will result in a less stressful loan repayment process, and save you money as well.
Putting Your Desires Over Your Budget
Everyone can relate to the feeling of zoning in on something that they know they can’t afford, but breaking this bad financial habit can actually be better for you in the long run. There’s no shame in becoming enamoured with a specific car, but you always need to make sure that you can afford it, before you lock yourself into any deal. Getting pre-approved is a great way to avoid this, because it shows you the kind of range of car you can afford, and goes a long way to prevent opportunistic dealerships from giving you a financing plan that isn’t in your best interests.