3 Mistakes That Could Cost You a Ton of Money on Your Car Loan

Buying a vehicle is one of the biggest purchases you’ll make. If you’re like most of us, you’ll need a loan to pay for it.

Here are three common mistakes to avoid:

1. Getting a Loan From the Dealership

When you buy a vehicle, the dealership will offer to finance it for you. It’ll tell you reassuringly that it’s the same kind of car loan you’d get from a bank. Heck, maybe it’ll throw in some special incentives — today only! You can take care of all this right now without even leaving the building, my friend!

Suuuure. Just nod your head politely and ask for the dealership’s best terms. Then shop around, because it’s not uncommon for dealerships to mark up interest rates on loans, or to add unnecessary fees. You can typically get a better deal on a loan from your bank or credit union, or from an online lender.

If you’ve already made this mistake, don’t worry! If you already have an auto loan, it’s not too late to get a better one.

2. Not Looking for a Better Loan Than the One You Have

You probably haven’t given your car loan a second thought since you drove your newly purchased vehicle home from the dealership and parked it in your driveway for the first time.

After all, this is the deal you’re stuck with, right? What’s done is done.

Wrong! Most people have no idea how easy it is to refinance a car loan and how much money they could save.

It won’t impact your credit score to check your rates.

3. Getting a 5-Year (or Longer) Car Loan

It’s a fact: People keep taking out longer and longer auto loans. Over the past few years, there’s been a sharp increase in the number of car buyers signing up for long term  auto loans,  These longer loans account for majority of all auto loans.

“These loans are more expensive and can result in consumers continuing to owe even after they are no longer driving their car,” the bureau’s director said.

If you can, avoid auto loans that last longer than five years, financial experts advise. For one thing, look at all the extra interest you’d pay with a longer loan. And as your vehicle gets older and its parts wear out, you’d be shelling out money for car payments and car repairs at the same time.

Honestly, you’re better off buying a cheaper vehicle instead.

Look Beyond Your Monthly Payment

The amount of your monthly auto loan payment is determined by three things:

  • the size of the loan,
  • the interest rate and
  • the length of the loan term.

If you’re thinking of refinancing your auto loan, check your rate  to see how much money you could save. But don’t focus solely on what your monthly payment could be. Look at the entire cost of the car!

 

 

SOURCE: PENNY HOARDER



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