Are you looking to buy a new car and are exploring some car financing options? Most of us who plan to buy new cars also opt for car financing as it is easier to pay for it in small installments. With the numerous car financing options available in the market, it can be very confusing to choose the right one. Before you zero in on any of the options, it is important to understand the 5 common mistakes when shopping around for car financing.
Not choosing the shortest tenure
Even though a longer tenure may mean lower monthly installments, in the long run, you are paying much more interest. It is ideal to choose a shorter tenure, although you have to pay higher installments so that you can save up on the accrued interest.
Focus on the car instead of the car loan
This is one of the top 5 common mistakes when shopping around for car financing. The brand new car with exciting features seems more interesting than the car loan. But, you must not forget that you are not only paying the price of your car, but also the interest of the auto loan company.
Not understanding hidden charges and fees
If you haven’t asked about the hidden fees and charges while taking a car loan, you may end up in big trouble in the future. Many financing companies have management fees, upfront fees, and exit fees. Make sure to read through all the terms and conditions before taking the loan. If you don’t understand the clauses, you can ask a financial adviser to take you through them.
Not knowing your credit score
Before you step out looking for a loan, make sure you are in a good financial state. Not knowing your credit score is one of the 5 common mistakes when shopping around for car financing. Credit scores reflect your financial status while borrowing a loan. Several free online platforms provide free credit scores to individuals based on their earning and debts.
Not negotiating a lower interest rate
Before you finalize on buying your car, you need to look out for financing options with competitive interest rates. Depending on your down payment and credit score, several companies may be willing to negotiate and offer lower interest rates. Hence, do not finalize on any car or car loan without checking the lowest interest option available.
The above-mentioned are some of the 5 common mistakes when shopping around for car financing. Buying and owning a new car is definitely exciting, but if you haven’t considered your financing options properly, you can end up paying more than you should. Checking your affordability, credit score, and choosing the right car financing option will definitely get you a great deal.
