Car Loan Mistakes to Avoid

There are a number of steps in the used car process, and at Auction Direct USA, we’ll keep you prepared for all of them. In particular, there are a few pitfalls you want to avoid falling into when searching for a preowned car from a car dealer.

Some of these pitfalls relate to normal mistakes you’re incentivized to make, whereas others are mistakes made even before the trade-in process begins. Let’s look at a few of these and how to stay away from them.

Lack of Knowledge

There are several areas you have to have at least a basic knowledge of during this process, all of which our staff can easily explain to you. A few of the most common:

• Credit score: Knowing your credit score in advance – and improving it if it’s too low for your desired purchase – is vital. If you don’t know this score, you’re at the mercy of the dealer when establishing your interest rate and other loan terms. Learning credit score is easy and free once a year online.
• Loan term length: Someone may try to sell you on a longer-term loan, which will seem profitable due to lower monthly payments. But in reality, you’ll end up paying more on the life of the loan for the same loan amount due to all the extra interest you’ll pay. If you have the finances to manage a slightly larger payment each month, go for the shorter term.
• Early payoff: Paying down a loan early is a great way to reduce interest payments, but some lenders require a fee for an early payoff. Make sure you know in advance if this is the case.
• Interest rate: Ask about APR (annual percentage rate) and other details of your interest rate. Some lenders will prey on borrowers who haven’t done their homework here.

Too Many Add-Ons

It’s a dealer’s job to offer you all sorts of add-ons during the process – everything from warranties to insurance. These will often be rolled into financing, so they’ll seem like less significant expenses. There are times when these can be worth it, but watch out for accumulating too many incentives or add-ons that might drive up your price on the back end.

Rushing

The trade-in and purchase process can be long and arduous, but you have to prepare yourself for this. Bring snacks and water if you’re worried about getting hungry or thirsty, and don’t make significant plans anytime directly after your car search. Rushing out the door in the final stages is a bad idea – these are the most vital stages, where details and paperwork are finalized.

Want to learn more about common used car mistakes, or interested in any of our other car dealer services? We’re standing by at Auction Direct