While automobiles are a top necessity here in Phoenix, we don’t want to see any Phoenician car buyer heavily burdened by their auto loans. That’s why we do our best to find the best auto loan for you. But there are cases where borrowers still overspend on their loans despite signing a great deal. What else could go wrong aside from abusive lenders? In this guide, we’ll teach you practical tips to avoid paying too much for your car loan. Here they are:
1) Put more money down.
Are you one of many borrowers who think that you spend more when you put more money down for a car? It’s time to ditch the misconception and understand what really happens when you make a bigger down payment.
A bigger down payment can remove a chunk from the total amount you owe the lender. It can reduce your monthly payment and interest rate. It can also help you get approved for a car loan easily even if you have bad credit.
For a bigger down payment to be possible, you should save up for it as early as possible. You can also use the trade-in of your old vehicle as down payment or as additional to it.
2) Search for the best rate.
Shopping around may consume a lot of your time and effort. But it actually is an effective way to find the best auto loan interest rate in the market. By comparing several quotes from different lenders and doing some math, you will be able to tell which offer overcharges and which actually saves you money.
Intentionally shop for the best auto loan deal before you finally take an offer.
3) Opt out of add-ons.
Dealers are fond of adding costs to your car purchase by charging you for extra products and services, some of which are not really necessary. Some examples of these extras are VIN etching, extended warranty, fabric protection, and car insurance.
Keep in mind that you can say no to these add-ons. You can find many of them sold at much cheaper prices outside the dealership. So, whatever kind of sales pitch or trick a dealer sales rep tries to pull on you, keep in mind that you are never obliged to take the add-ons with the car. Otherwise, you will overpay for your car.
4) Read the contract thoroughly.
Just when you thought the lender yielded on your demands, read the loan contract carefully before signing it. Why? Unscrupulous lenders can still make changes at the last minute to make the deal in their favor. Check if the terms and details in the contract are accurately and clearly stated. If there is anything you need to clarify, don’t hesitate to bring it up to the lender.
5) Improve your credit first then get an auto loan.
Nothing still gives a sure low interest rate on an auto loan than a good credit. If you have bad credit, work on it first before getting an auto loan.
At least 6 months before applying for an auto loan, get a copy of your credit report through AnnualCreditReport.com. It’s free and you’re allowed to do it every 12 months. Take advantage of this privilege to check up on your credit and have an idea of how much interest you’ll most likely get.