5 strategies to avoid car loan pitfalls

Posted on Tuesday, January 5, 2016 - 10:34

When you’re in the market for a new car, and you don’t have the money to purchase it, car finance seems like a godsend. It allows you to buy the vehicle by extending you a line of credit, but beware of the pitfalls of car finance! Not everything is as it seems and if you’re not careful, you may end up being scammed or just taken advantage of, when it comes to money or the quality of the car. Therefore, it’s in your best interest to pay attention to these five strategies to avoid car finance pitfalls.

Engage in thorough research

This is a general rule for any major purchase you are thinking of making or any amount of money you are thinking of borrowing. Research is your friend and the better informed you are, the less likely you are to fall for a scam or overpay for something you could have gotten for cheaper. Shop around, look at what the prices are for the vehicle you want, how much the features cost, what’s the interest rate on car loans, etc. Holding this knowledge puts you at an advantage and shields you from lenders or dealers who would otherwise take advantage of you.

Be aware of your credit score and the options you have

You should know that your credit score is vastly important because it is what lenders base your interest rate on. In addition, a low credit score can also severely limit your choice of cars, for example. You have to be aware of your credit score and informed about what your options are. It’s true that a bad credit score makes things more difficult, but a lot of people make the mistake of not doing research on their available choices. That’s why they fall for lies about obligatory sky-high interest rates and fees. 

Know what you want and know it well

Before you go out shopping, take the time to sit down and make a list of features you are interested in. What do you actually want in a car? Is it a priority or something silly? Be ready to cut back on demands if you want to stick to a budget. Prioritise the necessary features over the vanity features and you have a better chance of ending up with a good vehicle in a decent price range. It’s important that you factor in the long-term maintenance costs attached to the car as well.

Don’t sign anything before you read it and understand it

This should go without saying, but you would be surprised at how many people sign contracts without reading them thoroughly first. Thus, please take your sweet time to read everything and don’t shy away from asking questions about points that are unclear, particularly when it comes to extra costs. Its important that you read all the clauses included in the contract most carefully. As a matter of fact, if you need to, take some extra time to reconsider your choice; the car isn’t going anywhere, no matter what the salesperson tells you.

Don’t offer a trade in

You might assume that trading in your used vehicle to the dealership will help you to obtain a sizeable discount on the price of the car you wish to purchase. However, studies show that this is actually a popular misconception. Thus, the smarter thing for you to do is to sell your used vehicle to a private buyer, instead of selling it to the dealership. Your gain will certainly be higher.

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