Mistakes people make with car loans

It’s a lot of fun shopping for a new car. Researching all the possibilities and test driving each of the potential models, then choosing on the one that’s ideal for you and slipping into the driver’s seat of your gleaming vehicle, breathing the indescribable new car scent… There aren’t many feelings that can compare to this.

When it comes to the financial side of things, though, there are a few frequent blunders to avoid. If you’re looking for a new vehicle and don’t want to end up in a less than ideal situation, read on.

Putting car finance last

There are so many variables to consider when looking for a new car that it’s easy to lose track of them. From conducting extensive research and reading as much as possible about the models you’re interested in, to shopping around for the best price, the negotiation process, and the plethora of other considerations, the most important piece of the purchasing puzzle, financing can become an afterthought.

Because financing is unquestionably the most important aspect of purchasing a new vehicle, it’s critical that you prioritise it. You don’t want to fall in love with a car only to find out you can’t afford it.

Not setting a budget

Living substantially over your means can have serious ramifications, whether it’s with a vehicle loan or anything else in life. It only takes one unforeseen problem that necessitates immediate financial attention to throw everything out of whack.

By sitting down and creating a budget, you can avoid this. This will contain any constant monthly credits (such as wages) and debits (such as bills, existing loan repayments, and so on), as well as calculating how much money is left over. This allows you to establish how much you can safely pay, allowing you to narrow down which makes and models fall inside your price range.

Being unaware of your credit score

Now is the perfect time to find out where your credit score stands if you don’t already know. Before you apply for financing, you should know your credit score because a poor credit score might affect your interest rate and limit your options for lenders and financial packages.

You may purchase a free credit report from Equifax to find out your credit score, which will include not just your credit score but also information about existing loans, defaults, and credit checks you’ve completed.

Make sure you review your report to see if there are any errors. If this is the case, take action as quickly as possible to improve your credit score.

No pre-approval before going car shopping

When it comes time to negotiate, having finance pre-approval gives you the upper hand from the moment you walk into the car dealership; the salesperson can no longer use their financing ‘deals’ to further confuse things, and you can ensure they’re putting the vehicle’s bottom line sale price down with no smoke and mirrors.

Rushing into things

Purchasing a new vehicle can be a very emotional process, and at time can be very stressful. If you start to feel a little hazy, take a step back and take a few deep breaths to re-centre yourself. You don’t want to make a huge decision like buying a car or picking the wrong financing on the spur of the moment; instead, take your time and make a calm, logical decision based on facts rather than emotions.

Poor negotiating at the dealership

Many people find negotiating to be a stressful/anxious experience, and with good reason. The salesperson is likely to have far more expertise. If you’re intending on handling your own negotiations, make sure you have researched and have all your information at hand. Make sure you have your finance pre-approved, don’t let your emotions get the better of you. Be ready to walk away if they don’t come to the party with price or option upgrades.

Going with dealer finance

As previously stated, having your financing pre-approved before speaking with a dealership gives you an advantage in terms of receiving a fantastic offer.

Furthermore, when a dealership offers you financing, they will flaunt terms like “zero percent interest” and other similar offers that sound too good to be true. And, as the adage goes, if something seems too good to be true, it most likely is. When you read the tiny print and discover about all the hidden fees and charges involved, and/or how the interest rate climbs significantly after a specific length of time, you might be surprised. The classic line is with 0% we are not able to discount the car. In other words, you are paying one way or the other. 

Not using a car finance broker

 By working with a car finance broker, you can prevent a slew of costly blunders. They’re worth their weight in gold, from being able to get pre-approval for you to taking the time to explain everything about the financial package you’re interested in.

They’re also your access to literally hundreds of financing possibilities from a single location because they’re not connected to any one bank or lender.

For more information about how we can help your business, call and one of our consultants will answer all your questions. Get in touch with us today and experience the Berra difference.

DISCLAIMER: The information contained in this document is general in nature and should not be relied upon as legal advice. Berra Finance does not warrant the accuracy or completeness of any representations made in the document or that the material is suitable for any purpose. You are responsible for assessing the material and seeking your own legal or financial advice. To the fullest extent permitted by law, Berra Finance excludes all liability for loss or damage (including indirect or consequential loss or damage) which may be incurred in connection with your use of or reliance on the material contained in this document.

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