When you are looking to buy a car and considering getting a loan, it is always best to be prepared. Here are the most common car loan mistakes to keep in mind before organising your auto finance.
1. Not doing your research
The importance of doing your homework before purchasing a car cannot be overstated. First, read up and get advice about the type of car you want. Take into account how often you will use it and what it will be used for, and questions around fuel economy, reliability and price are paramount. Expert car review sites or similar credible sources can be a good resource to obtain independent advice and aid your research!
2. Not calculating what you can afford
Before approaching a lender, make sure you understand your current and projected financial situations – consider your existing debt, if you are likely to make other large purchases in the near future; and how that will affect what you can afford to put towards a car loan. Following that, determine whether you can afford to meet the car’s monthly repayments, along with registration, stamp duty, and all the other costs that go into buying and maintaining a car.
3. Not considering the overall purchase price
If you’ve already decided to take a loan to assist in the purchase of your car, don’t just focus on how much your month repayments are going to be. A longer loan term may lower your monthly repayments, but this increases the interest, and therefore the overall amount you pay for the car. While it's important to make sure that you can afford to keep up the loans you take on, you should also try to negotiate for the best purchase price possible. Understand what additional fees you might have to pay such as stamp duty or dealer delivery charges.
4. Not getting your loan pre-approved
Before browsing for a new vehicle, getting your loan amount pre-approved by your lender or car dealers will allow clarity over what you can and can’t afford. Be aware that the pre-approval may only be available for a short period of time.
5. Not putting a down payment
If you are in a financial position to do so, consider making a down payment. A deposit reduces your monthly repayments, as well as the overall interest you will end up paying.