Shopping for a car in Elgin when you are on a budget can be difficult, but the process gets even more complicated if you don't know what you're looking for in a car loan. Getting the right car loan can save you money and time when you go to make your new car purchase. Here are five car loan mistakes you should avoid when it's time to buy:
1. Not Knowing Your Credit Profile - Before you ever speak to a lender at a dealership or a bank, do your homework ahead of time. Figure out what your actual credit score is and look online to see what some current interest rates are for your credit range so you can be prepared. If you give the dealership the first crack at running your credit you won't have any idea if their interest rate offer is fair or not.
2. Don't Spring for Extras - Different warranties, service packages, gap insurance and other extras can add to your bill. The truth is that gap insurance can be purchased separately through your insurance company, and most of the other add-ons you may not need at all. In addition, adding them to your financing total means that you're paying interest on all of them.
3. Missing the Big Picture - Every dealer has delivery fees and other charges that they add on to the total price of your car. One of the biggest car loan mistakes you can make is to accept these fees without questioning their validity. Again, if you're only looking at your monthly payment, your finance professional will gladly spread out payments or offer you other options, but they will almost certainly be sneaking extra fees in there somewhere. Many times those fees only make a few cents difference in your monthly bill but they add up to hundreds of dollars in extra money spent.
4. Over Borrowing - Perhaps you are trading in an old vehicle that you still owe too much on. The lender will likely agree to roll your negative equity forward and add it on top of your new car payment. This might very well get you into the car you want today, but it means you're way overpaying for the privilege, and you may never pay down this loan to match the value of the car as it depreciates. It's a vicious cycle.
5. Falling for Bad Incentives - Most dealerships offer big cash rebates or some other cash back incentive to get you in the door, however that doesn't necessarily mean you'll save money. Going for the cash back today could mean a significantly higher interest rate over the term of your loan. Make sure you go online and find a calculator that will tell you how much you're really paying under each circumstance.
These are just five of the car loan mistakes that people in Elgin and St. Charles need to watch out for when car shopping. The more you learn about car loans and your credit today, the more money you will be able to save in the long run, and the better chance you will have of being able to sell the car for more than you owe if you ever decide to upgrade.
Stop by McGrath Nissan and speak to one of our finance professionals about your credit situation today.