The excitement of owning a new car tends to take over one’s good sense. This pushes many to dive into loan contracts they can’t possibly afford or acquire a car with expensive extras they don’t need. Applying for an auto loan is a tremendous responsibility which will carry over for several months or years. Hence, there should be no room for any mistakes whatsoever. Car finance studies in Perth and Melbourne identified several costly car loan mistakes many buyers commit.
Not knowing your credit scores
Credit scores determine, to a considerable degree, the amount of interest you will be paying on your car loan. A standing credit score below 720 could cost you a significant amount of money on the interest alone. Common errors can appear on your credit account ratings that do not work in your favor. You can avoid this by obtaining a credit report from your bank prior to your car loan application. If some items of this nature mistakenly appear on your credit report, have them removed so they do not affect your credit scores. Closing old credit card accounts that are showing open line credits also helps increase credit scores. Remember, your credit worthiness defines your car loan interest rate.
Not going to the dealer with a pre-approved auto loan
Shopping around for and obtaining a pre-approved car loan before you walk into a dealership is a smart move. Your bank is a good place to start since you are already an existing client and they may be able to offer you a good rate. Dealers do offer financing facility however this usually comes with a higher interest rate attached as compared to those offered by credit unions or banks. A pre-approved auto loan will give you better bargaining power when it comes to bargaining and negotiating if the dealership say they could offer you something ‘better’.
Not putting down a down payment
If you have invested at least 20% on down payment, this would lessen your total debt quite considerably. If you are unable to, this would mean your car loan debt is worth more than the car itself and inevitably, this increases your monthly repayments due to the interest rates. If possible, ensure you have sufficient down payment at your disposal before applying for any auto loan deals.
Not keeping in mind the purchase price
Don’t think you have won a bargain in negotiating lower monthly payments for your auto loan because you haven’t. In fact, you would have signed on to more debt. Lowering the amount of your monthly payment plan is essentially stretching the number of months in the plan and adding a whole bunch of figures to the interest. Instead of setting out to lower your monthly payments, focus on lowering the total purchase price.
Not saying ‘no’ to add-on offers
Accepting add-ons that you can buy outside the dealership such as extended warranties, paint sealants or fabric protection only adds up to your loan plus interest. Turn down such an offer and buy them separately when needed.
Not reviewing the contract thoroughly before signing
Review and reexamine any loop holes in the deal taking into considerations major agreements you made during negotiation before signing the contract and closing the deal. Be vigilant against additional items inserted into the contract that wasn’t discussed during the negotiation - especially the ones you did not approve.
Get car finance advice from Perth and Melbourne finance companies and avoid costly car loan mistakes listed above so you will be able to go a long way in getting the right car for the right price. Do your research because uninformed decisions can cost you a lot of money.
For more on car loan advice and information, Westminister International is a good source if you have any further questions that relates to a car loan.
