Taking out an auto loan can be a tricky prospect, which is why so many people make mistakes along the way. But some mistakes have larger repercussions than others. So to help you avoid the problems that can arise from the auto loan process, here are a few potential mistakes you’ll want to watch out for.
Negotiating the auto loan rather than the price of the car.When you first walk into a dealership to start the auto loan process, they will ask you how much you’re looking to spend in monthly payments. This is not the best way to go about paying for a vehicle. Dealers have ways of adjusting interest rates and hidden fees to give you the payment you want. But in the end, you may end up paying thousands more for your car than you should. This is why experts suggest you find out the total price of the car and begin negotiating the monthly payment on your own.
Know your credit score before entering a dealership. Another mistake that car buyers make that ends up costing them when taking out an auto loan is not knowing their credit score or how it affects interest rates on loans. On average, finance companies will offer the lowest rates to individuals with a FICO score of 680 or higher. Any score lower will see a hike in rates. Of course, the interest rate you pay on a car determines your monthly payments. So before walking into a dealership, it’s crucial to know your score and potential interest rate. You can even access your credit report for free online with companies like Go Free Credit.
Consenting to purchasing a car without finalizing loan documents. This mistake can potentially cost you the most, as you are essentially leaving your financing decision in the hands of the dealer. It’s not unusual that a dealer can get a car buyer extremely excited about driving away in their car – but nothing should stop the buyer from remembering that payments must be made. If you drive away in the car while the dealer “takes a few more days to determine financing,” you may be hit with astronomical rates that you now are committed to paying.
The auto loan process doesn’t have to work against you, but it’s up to you to make sure that you don’t make crucial mistakes. If you educate yourself before stepping into a dealership, you’ll find that taking out an auto loan is actually very rewarding.