Making the most of your money when buying a new car is anything but luck. Rather, saving money on your auto financing is all about taking the time to understand the ins and outs of buying a new or used car. Become an informed, more confident buyer on the showroom floor by educating yourself on some of the most costly mistakes that could cut into your car savings.
Mistake #1: Skipping Your Homework
Even if you have a specific make and model in mind, not taking the time to do your research can prove costly to any car buyer. The research phase of your purchase should begin months before ever stepping foot on the showroom floor, helping you collect all the tools you need to make an informed decision.
The internet has greatly evened the playing field when it comes to car-buying, so be sure to get all the facts, figures, dealership quotes and financing options you need to drive away with more money in your pocket.
Mistake #2: Forgetting the Importance of Your FICO Credit Score
Under the Fair and Accurate Credit Transactions Act, everyone is entitled to a free copy of their credit report once every 12 months. If you find yourself in the market for a new car, now is the time to take advantage of these free reports.
Unlike mortgage loans, auto loans tend to be easier to obtain due to its smaller amount. However, having a credit score below the average of 650 can leave you paying higher interest rates than what you would like. Take some time to review your credit score and clear up any mistakes on your credit report in the months before starting your search.
Mistake #3: Accepting the Dealers Financing Without Exploring Your Other Options
A pre-approved car loan can provide a baseline to guide your purchase, helping you know exactly how much you can afford to spend while providing you with an initial interest rate to use as leverage during the negotiating process.
When shopping around for your loan, also use an auto loan rate calculator to help you figure out just how much you can afford. If you allow the dealer to tell you everything about your finances and what type of loan they can get for you, you just may not be getting the best deal.
Mistake #4: Focusing Only on the Monthly Payment
If you have a budgeted amount set aside for a monthly car payment, its easy to start exclusively shopping for cars that fall in your price range. What many car shoppers dont recognize is the fact that this places all the power in the hands of their dealers finance department.
Instead of focusing on negotiating a monthly payment, pay attention to the bigger picture. Put your effort into negotiating a final purchasing price, limiting what a dealer can do to make a car fit in your budget through longer-term loans to keep you from overpaying. Dont forget to factor in any additional dealership fees, licensing and insurance costs as well!
Mistake #5: Falling for No Money Down
Many dealerships offer the option of a low or even a no money down payment towards the purchase of a brand new vehicle. However, paying too little of a downpayment can quickly lead you towards going upside down on your auto loan.
According to Edmunds.com a new car loses about 22 percent of its value in just its first year of ownership, and a low or no money down payment quickly puts you behind on your autos equity. If youre looking to avoid falling victim to the pitfalls of your loan, it always pays to put more money down whether through cash or a trade-in. If your finances allow it, aim to put at least 20 percent down on any new vehicle.
Mistake #6: Not Paying Attention to the Total Ownership Cost
While your auto loan monthly payment will be the biggest cost of your new car, its important to budget in the other cost that are associated with car ownership.
More often than not, a new car will carry a larger monthly insurance premium, depending on the make and model of your next vehicle. Be sure to take some time to meet with your insurance agent to understand any changes in cost associated with the new car you have your eyes on. Insurance premiums aside, gas mileage and maintenance costs will also affect the true cost of keeping your car on the road, and must be factored into your decision to help you keep your vehicle within your monthly spending budget.
Shopping around for that new car youve always wanted doesnt have to be a hassle. Discover how CHROME can help you drive off in the car of your dreams in no time at all and make an appointment with a CHROME store near you. Our CHROME reps can go over all of your options including CHROME Drive, which allows you to visit a participating dealer and sign and drive that day.