Shopping for a new car often starts out as exciting before ending as demoralizing and stressful. Often the biggest problem is the price tag and the arguments and pressure that accompany the financing process. However, by not falling into the five most common financing pitfalls, your next experience can be one of empowerment and success.
Having a Low Credit Score
A low credit score is nothing but trouble when it comes to bargaining for an interest rate on your financing plan. A low score shows the finance office that you are a risky bet and that you might not be good for paying off the debt. If this describes you, determine if you can wait to buy your next car until you build up your credit score by making on-time payments and paying off debt.
Having No Bargaining Power
The best way to get a good deal on a car is to enter the lot with all of the power on your side. You can do that by ensuring that you have a good auto loan with you when you enter the lot. Instead of settling for a financing plan offered by the dealership, apply for a loan at your local bank or credit union or even through an online financial site, such as Capital One. These no-obligation loans often have significantly lower interest rates, saving you $1,000 or more over the length of the loan.
Choosing Zero-Percent Financing
While zero-percent financing can be a good deal, it might not be the best deal. For example, you may believe that zero-percent financing is a better option the rebate option. However, because a significant rebate can drastically lower the amount to be financed, it can often save you up to 50% more over the length of the loan.
Signing for the Wrong Deal
If you are financing at the dealership, your head is normally spinning by the time you make it into the financing office. You may assume that the dealership has gotten all of the deals that were mentioned to you in the fine print, and you may opt not to read the entire contract. This can spell disaster to you in the way of increased monthly payments and missing rebates. Be sure to read everything before signing, and remember that at this point, you have the bargaining power because they want your business.
Signing When You Have Reservations
Because dealers are eager to get their commissions, they may pressure you into signing for the loan immediately. If you are feeling rushed or confused, do not feel bad about walking away from the deal, at least for now. Trust your gut instinct, and remember that you cannot return most cars if you change your mind.
Depending on your shopping persona or on your knowledge of cars or financing, you may find that you are more apt to fall into one or two of these problems rather than all of them. However, even getting trapped by one pitfall can equal a huge cost. Above all, make sure that when you enter the dealership, you are the one with the power. Next thing you know, you will be driving off with your sparkly new car and a payment plan that works with your personal budget.
About the Author:
“This article was written by Dixie Somers. Dixie is the proud mother of three girls and wife to a wonderful husband. She is a part-time blogger and freelance writer, and she enjoys writing for several niches, including business, family, and finance.”
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