Auto Financing | Mistakes To Avoid


– [Narrator] Financing
a car can be stressful and you can end up making mistakes that could cost you big in the long run. Learn to avoid these common mistakes and you’ll be able to get
the best deal possible. Down payment. It might seem smart to
skip the down payment, but no money down financing
is always more expensive. Trying to put 20% down
for a $30,000 new car, you can save over $100 a
month on your payments, and almost $1,000 in interest. Monthly payment. If you take out a longer loan in order to lower your monthly payments, you might end up paying more than your car is ultimately worth. Another way to avoid high monthly payments is just to buy a cheaper car. Try working backwards from
your desired monthly payment with a 48 month loan and
see what price you get. Credit score. Don’t believe the dealer who says your credit score doesn’t matter. People with bad credit pay
much more in loan interest and people with good credit might qualify for extremely low interest rates. To get the fairest deal,
know your credit score and any promotions before
you get to the dealership. Variable rate loan. A variable rate loan let’s you
pay less interest at first, but if your interest rate suddenly jumps, and your income doesn’t, you could default on your
payments and ruin your credit. Why take the risk? Fixed rate loans aren’t
that much more expensive and you’ll always know what
the monthly payment will be. Rate shopping. Always compare the interest rates offered by banks, credit unions,
online lenders, and dealers. Pick the one that saves you the most. Pre-approval. Don’t miss an opportunity to
get pre-approved for a loan. With pre-approval, your lender gives you the entire amount to
cover the cost of vehicle. That means all you and the
dealer need to negotiate about is the selling price of the vehicle. Taxes and fees. It’s tempting to roll the fees
and taxes up into your loan, but then, you’re paying interest on them. It’s best to pay all the fees upfront with your down payment, and
if any fee is unclear, ask. The dealer side. When a dealer sells a car,
most of the profit is made from padding the interest
rate and selling extras. Regardless of whether the
dealer finance person offers you a great rate, you can still ask an outside lender to match it. You might be offered overpriced extras like GAP insurance, undercoating,
or an extended warranty. But unless you’ve done
your homework on them, you won’t know if they’re a good deal. Don’t be afraid to say no. And if an extended
warranty is right for you, you can get a reputable one at any time before the original warranty expires. With the right amount of
preparation and research, you’ll avoid these mistakes, save money and be driving away in your new car in no time with a big smile on your face. (bright music)

Paul Whisler

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