Whether you're buying a car for cash or need to find your next auto loan, there are a few mistakes that are best avoided, especially if you're financing a used vehicle. If you want the most bang for your buck and a smooth car loan situation, be on the lookout for these scenarios …
Best to Avoid These Car Buying Situations
If you can help it, you should always opt for the safest, most reliable vehicle you can afford. In order to do this though, there are some common rules many people try to stick to as borrowers.
Whether it's doing the right thing for your credit situation, or knowing that you have to start small and build up to your dream car, it's easy to get carried away in the excitement of buying your next vehicle.
No matter how careful you are when working toward your next auto loan, there are a few situations that are best avoided:
- Being a payment shopper – When you're a payment shopper your main concern is getting the lowest monthly payment possible on a car loan. Before you jump at the chance for a low monthly payment, add up the total loan cost. Lenders often achieve low monthly payments by extending your loan term. This means you pay less for longer, but the longer you're left paying, the more interest charges stack up. This sometimes leads to you paying more for a vehicle than it's worth.
- Buying sight unseen – Cars aren't one of those things that you can try on and take back later. So, it's very important that you know what you're getting into. Many of the newer car shopping methods can get away with shipping a vehicle to you sight unseen because they often come with a seven-day return policy. This is relatively unheard of for other types of car sales, such as dealership sales or private sales.
- Skipping the test drive – To add to the last point, always take a vehicle you're planning on buying for a thorough test drive. Get on and off the expressway if possible, take a dirt road, and see how it handles in stop-and-go traffic. Pay attention to how it rides and handles, especially if it's a used car. Test all the knobs, buttons, door handles, and infotainment systems.
- Avoiding a trip to a mechanic – Even if you have the best test drive you've ever had, you should still take a used vehicle to a certified mechanic before you agree to anything. If a seller or dealer insists that you don't need to, walk away. Mechanics may be able to spot potential issues that you didn't even know to look for.
- Signing before the contract is finalized – If someone hands you a contract that's not completely filled out and asks you to sign it, consider walking away. Read what you're signing from top to bottom, point out and notate any mistakes, and have a clean contract printed if you need to. You're never under any obligation to buy a car just because you spent time on the sale. If something is off, you don't have to sign. Signing an incomplete contract is how many consumers get pulled into higher cost deals then they expected, or end up in a yo-yo financing situation.
- Not knowing your credit situation – Another big mistake that some buyers make is to go into an auto financing situation blind. If you don't know where your credit score stands, or what's on your credit reports, then you give all your negotiating powers to the lender or dealership. When you know where you stand, you can research situations similar to yours and find out what the average interest rates are for people with similar credit scores. Try to make sure that the lender isn't offering you an unrealistic deal.
These are things you should avoid in any car buying situation. If you're already in a pinch due to credit issues, the biggest mistake you should avoid is going to the wrong lender. Not all lenders finance bad credit borrowers, and trying to work with the wrong one may only damage your credit further.
How Subprime Lenders Work
There's a group of lenders called subprime lenders that are teamed up with special finance dealers. These indirect lenders are equipped to finance people in many types of bad credit situations. It's important to go to a lender that can work with your situation because getting turned down by the wrong ones time and time again can begin to wear on your credit score.
If it's already lower than you'd like, it can be important to preserve the credit score you have while you're searching for the right auto loan. There are two ways you can make sure that your credit score has as little negative impact as possible: rate shopping and applying with a subprime lender.
Rate shopping is when you apply for the same type of credit with multiple lenders to find the best deal. If you do this properly, you still see the different hard credit pulls on your credit reports, but your credit score is only impacted by one of them. In order to do this, apply for these loans within 14 days.
The second option you have is to work with a subprime lender. These lenders look at more than just your credit score to get you approved for a car loan. They look at your willingness, ability, and stability to determine to extend you an auto loan. Not all dealerships are signed up with these lenders, though, so it can sometimes be difficult to pick these dealers from a crowd. If this sounds like the better option toward your next car loan, but don't know where to start, we can help.
Ready to Get Your Next Vehicle?
If you're ready to get on the road toward your next vehicle, Auto Credit Express is here for you. We take the stress and hassle out of finding the dealership for your next auto loan. We've been matching consumers to local dealers across the country for over 20 years, and we want to get you started. Simply fill out our fast, free, and easy car loan request form and we'll get to work for you!