5 car loan mistakes that cost you money
It is necessary for you to do more than just simply strike a “good” deal with the salesman on the sticker price. Mistakes on car loans can cost you money and eliminate the savings which are negotiated on the price of buying. Here are top 5 most common car loan mistakes people often make when it comes to car loans:
All You Need To Know About Mistakes Of Car Loans To Avoid
1. You Negotiate The Monthly Payment Instead Of The Buying Price
In the perfect world, there is no finance manager will ever try to hide the costs in a certain loan contract. Nevertheless, the fact is that it occurs and does happen more than it should because purchasers do not always consider the total cost of car upon negotiating. If you begin hammering out your deal by looking at the eventual price, it is harder for a dealer or a finance and insurance manager to conceal the inflated fees or expensive add-ons. To negotiate the price of every cost category separately, it is better to minimize the individual negotiating pieces – trade-in, price and car financing.
2. You Let The Dealer Determine Your Own Creditworthiness
The next one in regard to mistakes of car loans is letting dealers define your creditworthiness. Experts explain that the creditworthiness of yourself will determine your car financing interest rate. The credit score is exactly your creditworthiness, ranging from 300 to 850, and is dependent on your credit report with the 3 agencies of credit reporting – Experian, Equifax, and TransUnion. If you have a high credit score, you can qualify for a better rate of car loans. Knowing your credit score before setting foot on the lot of the dealer is always important, helping you save money significantly.
3. You Make The Wrong Choice Between Low Interest Rate Loan And Cash Rebate
For those who want to take advantage of the offer of a cash rebate / low interest auto loan of the manufacturer, then you should research carefully before making a decision. The method that nets you the most savings will vary from offer to offer. It is better to know your credit score before having a talk with the financial manager so you could avoid one of the most mistakes of car loans that cost you money.
4. You Roll Negative Equity Forward
In regard to car loans, the term “upside down” is used to relate to being in debt more on your car than it is really worth. The difference lies in “negative equity.” As a dealer announces to a consumer who is “upside-down” that he could fold the negative equity in to the car financing of the future deal, then he is meaning that he is going to add it to the buying price of a new car. Besides, if you are upside down on the last trade-in, then chances are you will be more upside down the next time. It is a terrible practice which should be avoided.
5. You Finance The Add-Ons Which You Could Purchase Separately
According to a recent report about car loans, it is estimated that 37% of the average gross profits that were earned in a used and new car sales departments were carried out via the aftermarket add-ons. The advice is saying no”. Actually, they are there in order to make additional profit for the dealership by enhancing the interest rates, and selling the extended guarantees as well as add-ons like pain sealant and fabric protection.
Even when your want is an extended guarantee or insurance of life credit, these items will still be available at the lower cost from sources that are outside of the dealership. If you fold them into your own car loan and spending money on them for a lifetime of car loans could cost you a lot of money. Moreover, do not hesitate to question all the fees that you do not understand. The dealers could pen down other fees into your contract and give them some official-sounding names. In fact, these fees are made in the effort of taking profit on the end of the deal as the consumer’s guard gets down.