When you are in the market for a new car, you will likely need to secure funding to pay for it. Many people make mistakes when doing this and end up paying more than they should or getting a car that is not right for them. Fortunately, this article has the information you need to save yourself from future regrets about auto financing. Here are five common mistakes to avoid when securing funding for a new car.
1. Not Shopping Around for the Best Rate
When looking for a loan to fund your car purchase, it is vital to shop around for the best interest auto financing rate. Many people go to their bank or credit union and take whatever rate they offer without considering other options. However, there are many different lenders out there, and by shopping around, you could save yourself a lot of money in interest payments.
2. Not Considering the Total Cost of the Loan
When looking at car loans, it is essential to consider the total cost of the loan, not just the monthly payment. Many people focus on the monthly fee and end up getting a loan with a much longer-term than they need and end up paying more in interest over the life of the loan. Make sure you know how much you will be paying before signing on the dotted line.
3. Not Having a Down Payment
Having a down payment can save you money in the long run and make it easier to get approved for a loan. Many people think they need to put down 20%, but this is not always the case. A down payment of 10% or even 5% can sometimes be enough to get you a lower interest rate and help you avoid having to pay private mortgage insurance.
4. Getting an Auto Loan from the Dealer
The dealer will not always give you the best deal on your auto loan. They may mark up the interest rate in order to make more money off of you. It is always a good idea to get a pre-approval from a lender before going to the dealership so that you know what kind of interest rate you should be getting.
5. Not Paying Off Your Loan Early
Finally, if you have the opportunity to pay off your loan early, do it. You will save yourself money in interest payments and will be able to pay off your car sooner. Many people think they have to wait until the loan is up, but this is not the case. You can make extra payments whenever you want and pay off your loan early.
By avoiding these common mistakes, you can save yourself money and time when securing funding for a car. Be sure to shop around for the best interest rate, consider the total cost of the loan, have a down payment, get a pre-approval from a lender, and pay off your loan early if you can. Otherwise, you may end up regretting your auto financing decision later on.