3 common car financing mistakes
When drive away means a lot more to pay.
Whether you are purchasing a new or used car, chances are you will need finance before you can drive away. In all the excitement, you may be quick to go with the finance deal the dealership is offering, however, this could end up being a big mistake. Before you sign the dotted line, here are some of the most common car financing mistakes people make, and what you can do to avoid them.
Mistake: Being caught up in the moment
Often trying to find the best finance option ends up in the too hard basket. When you have an enthusiastic salesman offering you the ideal car at a reasonable price, it can be tempting just to go with their on-site financing. The fact is that car dealers don’t make a lot of money off the cars they sell, and instead make more money from the finance interest and warranties that they provide.
Solution: Have your finance sorted before you head to the dealership. Usually dealerships don’t have access to a wide range of lenders and loan options.
Mistake: Not comparing your options
There are plenty of finance options available including personal loans, car dealership finance, and leasing, and these loans come with either fixed or variable rate loans. It can be really confusing when all you want is a new car.
Solution: Do your homework beforehand and be willing to shop around for finance. This means looking outside your bank and at non-bank lenders. Aim for finance without ongoing fees and penalties for early repayments. This will also help to keep the total cost of your loan down regardless of the interest.
Mistake: Showing your cards
You want that perfect car, you have done the maths, and you can comfortably afford your monthly repayments. Surprisingly, telling your car dealer this won’t help you to pay the lowest amount and get the best finance terms for your new car. Once you become known as a ‘monthly payment buyer’, you have little chance of negotiating the price down. You could also get stuck paying your loan back for longer as the dealership throws in a higher interest rate and other fees.
Solution: Keep your monthly repayment amount to yourself, and make sure you negotiate separately your new car deal, your trade-in, and most importantly, your car financing. Also, keep the term of the finance as short as possible. You may have a reasonable monthly amount, nonetheless, over a longer period of time it soon adds up and you can end up paying much more for your car.
Savvy CEO, Bill Tsouvalas recommends taking the time to compare your car finance options….
“Doing your research before you walk into the dealership will give you a much bigger financial advantage down the track.”
“Don’t be too quick to jump on the finance offer provided by your dealership. You may be able to drive away with your new car today, however, by comparing finance options across a range of banks and lenders, it can take thousands of dollars off how much you actually end up paying for your car.”
Get smart with your vehicle finance. Use the Savvy’s car loan calculator, to decide how much you should borrow and estimate your repayments.