Getting ready to buy a car can be an exciting time. But if you have bad credit, or even no credit, you could put yourself in a situation where you pay too much. The good news is that this is avoidable if you follow these important tips.

Look Past the Monthly Payment

woman doing research on computerOne of the first things car buyers look for is the monthly payment. It may look like you’re saving money by choosing a lower monthly payment, but you could be putting yourself in a bind.

The monthly payment is important to consider, but basing your purchase solely on that is never a good idea. If you go to a dealer with a specific monthly price point in mind, they can take advantage of you. Dealers can take your payment target and inflate the sales price by including an extended warranty or other add-on products. A good tip is to try to get pre-approved for financing so you can focus on negotiating the price of the vehicle at the dealership.

Don’t Pick a Long Loan Term

Another important thing to look out for is the length of the loan. The average auto loan term has increased over the past handful of years. The lower monthly payment may look attractive, but if you decide on a longer loan (anything over five years), your interest charges will increase.

The risks associated with longer loan terms can put consumers, especially those with credit issues, in a tight financial situation. With more money going toward interest, you could end up upside down on the loan much longer. The best option is to pick the shortest affordable term possible. Doing this will decrease the amount of interest charges and save you money.

Shop and Compare Online

Have a budget and make sure you know your credit score and the interest rate people in similar situations qualify for. These things will help narrow down your search to vehicles in an appropriate price range for you. You can do this by doing research before you set foot in the dealership.

When you’re ready to find financing, apply at your local bank or credit union. If pre-approved, you’ll have some bargaining power when you visit a dealership. Also, if you walk in pre-approved, the dealer will try to find a better rate than you currently have.

However, it can be difficult for people with less than perfect credit to get approved this way. Most subprime lenders don’t do direct loans, so if you have bad credit you’ll probably need to apply for an auto loan through a special finance dealer.

Bottom Line

Thorough research and careful planning can prevent you from overpaying on a car loan. But the costs go beyond the monthly payment – so think twice about extending the loan term to lower the cost before you buy.

If you need an auto loan, but worry your credit will limit you, Auto Credit Express is here to help. We've teamed up with a nationwide network of car dealers that are equipped to handle challenging credit situations. Our free service wants to connect you with one of them in your area. Get the process started by filling out our secure car loan request form.