Buying a new car is an exciting time where most of our thoughts turn to the colour, engine, features, benefits, make and model. Many buyers don’t place enough thought into the finances behind it when buying with a car loan.
That’s what today’s post is all about. Our Woodstock auto loans team outlines some key errors we see all the time when people get too excited about buying with a car loan.
Shopping Before Auto Loan Prequalification
There are a few things we recommend everyone using an auto loan does before hitting the dealerships. Set up a budget so you know what you can afford, save for the down payment, check your credit score and get prequalified.
It’s that last we want to concentrate on now.
There’s no point even beginning to shop for a car until you know how much you’ll have to buy it.
Getting prequalified is a key part of preparation. You check your math and have a good idea of whether you can afford the loan or the car. It’s the final sanity check before you can go car shopping.
Looking at the Monthly Auto Loan Payments
If you’re looking at auto loans to finance your new car, you need to look further than the monthly payment. That’s the headline figure but you also have to consider insurance, running costs, maintenance, gas and the other expenses that come with a car.
If you’re borderline on whether you can afford the loan or not, don’t forget to factor them into your calculations. A lender will and it may be the difference between being accepted and not.
The running costs will depend on the age of the car. New cars will often come with a couple of years’ servicing included with everything else covered by warranty.
Used cars will come with 3 months’ warranty and the rest is up to you.
Insurance, gas, tires and other consumables will be your expenses regardless of the age of the car.
Overall Cost of Buying with a Car Loan in Woodstock
The other thing to check with an auto loan is the overall cost of borrowing. For example, borrowing for longer means a lower monthly payment but a more expensive loan overall.
Conversely, a shorter loan means higher monthly payments but a lower overall cost of borrowing.
You need to check the total cost of interest over the loan term and not just the interest rate and the amount each month.
Sometimes the differences can be significant and you need to be fully aware of what you’re signing up to.
None of these three mistakes are showstoppers but they can detract from what is usually a quick and painless process. If you take all of these into account in every Woodstock auto loan you apply for, you should have a much smoother and more enjoyable experience.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!