A car loan and purchasing a car tend to go hand in hand. Not only does it give you access to a new or used car, but it can give you an option of making comfortable repayments that are suitable for your budget. However, there are 2 common financing mistakes that people make that can end up costing them.
Being sold out on a car instead of the loan
To find the car first before getting a loan can raise a lot of financial red flags that can end up leaving you in the red so it's important to understand how does a car loan work and have your pre-approval in order. Before you go out to get a car it is important to set a budget. This will help you avoid the stress of taking a car that will end up costing you more than what you can afford. Approaching a lender is the next thing that needs to be done after you have set a budget.
Having a car loan can let you know what type of car you can afford. It is important to compare loans from various lenders and dealers to see which one will offer you the best value for your situation. Check the interest rate, fees and charges to see if you will be able to comfortably afford the loan. This can also help you create a realistic budget to cover expenses.
Try to avoid applying for too many loans in a short space of time as this can affect your credit report and decrease your chances of being approved.
Purchasing the first ‘good deal’ you come across
One mistake that car buyers make is not putting enough research when buying their car. The common mistake people make is going to the nearest dealership and choosing a car that’s close enough to their budget. It is vital to compare the cost of the same car across various dealers to find one that is cheaper by a few hundred dollars.
You can also use online platforms to find a car that matches your budget. According to Roy Morgan, 67.6% of people who were intending on buying a new car in the next 4 years went online to do research on a car. However, new car buyers rush the process when it comes to researching a car which can increase their chances of purchasing a lemon. 69% of people research a car 3 months prior to purchasing it, but this number increased to 72% within a month.
Giving yourself enough time to purchase a car can also give you the advantage of catching a sale that can help you save or spot a lemon that is posed as a new car. Remember to run a used car through sites such as CarHistory or PPSR to see the cars full history.