Top car loan mistakes to avoid

family excited to drive their new car

When you’re looking to buy a car and are looking to finance it with a loan, it’s always best to know all the implications involved. Here are some of the most common mistakes to try and avoid when organising your car finance. 

Not doing your research before buying a car

1. Not doing your research before buying a car

Don’t underestimate the importance of doing your homework before purchasing a car through finance. First, it’s a good idea to read up and get advice about the type of vehicle you want – consider how often you’ll use it and what it will be used for. Key considerations include fuel economy, reliability and price. Expert car review sites or other credible sources can be a good resource to obtain independent advice and aid the research process.
Not calculating what you can afford before taking out a car loan

2. Not calculating what you can afford before taking out a car loan

Before approaching a lender, make sure you fully understand your financial situation. Consider your existing debt and any upcoming large purchases that could affect whether you can afford invest in a car loan. Once you’ve had a quote for car finance, do the maths and check to see if you can comfortably meet the car’s monthly repayments, car registration, stamp duty, and all the other various costs that go into buying and maintaining a car.
Not considering the overall purchase price

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 focus solely on how much your monthly repayments are going to be. While a longer term may well lower your monthly repayments, this approach also increases length of time you’ll be paying off the interest, so the overall amount you’ll pay will increase. You should also try to negotiate for the best car loan rate and best purchase price possible and understand any extra fees you might have to pay such as stamp duty or dealer delivery charges.
Not getting your car loan pre-approved

4. Not getting your car loan pre-approved

Before browsing for a new vehicle, getting your car loan amount pre-approved by your lender or car dealer. This allows clarity over what you can and can’t afford, so you won’t be tempted to push your financial boundaries. It’s worth noting that the pre-approval may only be available for a short period of time – so you may have to move quickly once you’ve had this confirmation of finance.
Not putting a down payment

5. Not putting a down payment

If you’re in a financial position to do so, consider making a down payment – a lump sum, or deposit that will reduce the amount you owe. This could help reduce your monthly repayments and the overall interest you’ll end up paying.

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