Buying a new or used car is an important decision. It involves considerable time, research and money. At first glance, you might think that the most important aspect of buying a car is finding the right car for you; however, there are several factors that impact your purchase more than you may realise. Here are five mistakes to avoid when financing a car.
1. Not shopping around for the best interest rates
If you plan to finance your vehicle, it’s important that you shop around and compare several different loan options, like by checking out a website like Driva car loan comparison. This will ensure you’re getting the most competitive interest rate possible on your new or used car purchase. If you neglect this important step, you could end up paying thousands of extra dollars in interest payments over the life of your loan.
2. Not knowing your budget for a car
Before you begin to finance a car, it’s important that you outline exactly how much money you have available to spend on a vehicle and then estimate what type of car loan makes sense for you. To help you determine the right type of car loan, make sure you set a budget for your car purchase. If you have a pre-approved auto loan, it’s helpful to stick to this budget when shopping for a new or used car.
3. Not knowing your credit score
If you plan on financing a new or used vehicle, it’s important you know your credit score before you begin to shop for a car. Why is this? Because loans with the best rates and terms are available to those with excellent credit scores. To get started, check your credit reports from the three major credit bureaus (Equifax, TransUnion and Experian). The credit bureaus generally provide a free copy of your report once a year.
4. Not knowing your estimated car payments
Before you begin to shop for a new or used vehicle, it’s helpful to know the estimated monthly payment amount that you can afford. Your total car costs, which include your monthly payment, estimated taxes and fees as well as the amount financed, will largely determine the type of car loan that is best for you. Make sure to always compare several different auto loan options before making a final decision.
5. Not planning for possible financial changes down the road
Planning for financial changes down the road is an important part of buying a car. What are some possible financial changes you may have to prepare for? Many things can happen in life that might affect your ability to repay your car loan. For instance, if you lose your job or opt to work part-time, you could find yourself struggling to make your monthly car payments. It’s best to start planning for this possibility before you begin financing a car.
When it comes to financing a car, avoid these five mistakes and shop around for the best interest rate on your loan. Not only will you save money, but you can rest easy knowing that you’re getting the right loan for your financial situation.
