10 Mistakes People Make When Getting An Auto Loan

Jul 18, 2018 /
Average reading time: 5 minutes
Author: lendinguser

The car-buying experience can come with many different encounters — some positive and some negative.

Securing a loan and getting the car you’ve had your eye on can sometimes be challenging.

There are several different mistakes that commonly occur, and it is important to know how to avoid them.

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What Not To Do When Getting an Auto Loan

If you’re in the market for a new vehicle, it is likely that you’ve already done your homework and due diligence in finding the right car.

You may be aware of the color you want and the specs on the vehicle, as well as the make and model.

And while these are often the first steps in many people’s journeys, people fail to take the time to get the loan that would work best for them.

Financially speaking, it is extremely important to take the necessary steps and time to get the auto loan that works best for your situation.

When looking for your auto loan and new vehicle, steer clear of these common mistakes.

#1 Going to the First Dealer Nearby

We get it – you’re excited about your new car and want to make the purchase right away.

Many people get hyped up about the idea of buying the car they want. Often, they’ll hop over to the first dealership that is nearest to them.

They quickly secure an auto loan and work out a deal to get the car they want. However, this is not a recommended practice.

Instead of going to the first dealer nearby, visit multiple dealers. Get second opinions, quotes, and options before signing up for an auto loan.

In reality, you could find a better deal on your new vehicle at another dealership down the road.

Make sure you do your homework, ask around and find the dealership that is willing to work with you and give you the best deal available on your new car.

#2 Letting the Dealership Do the Research for You

While this may seem like a no-brainer to some, it’s actually a common occurrence.

Along with entering the first dealership they see, many people also don’t research a vehicle’s worth, loan options, or other hidden fees.

Don’t fall into the trap of listening to the dealership.

If you want to get the best deal that works for your financial circumstances, you must do the necessary research.

You can arm yourself with the knowledge you need to successfully get a fair auto loan that works in your favor.

#3 Only Talking With One Lender and Sticking With Them

The smartest thing you can do for yourself is to get pre-approved for an auto loan before going into a dealership.

This means that you can walk in comfortably knowing that you have a pre-approved for financing in hand and most importantly know what your monthly affordability is for car financing.

This puts the negotiation power into your hands and not the car dealerships.

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#4 Not Comparing Prices on New Cars

If you’re looking for a new car, don’t just accept the price that’s listed on the car at the first dealership you go to. By doing this, you could lose tremendous amounts of money.

Spend some time researching and comparing prices on the new car you want. If you already know the specific car you want, check out your local dealers’ prices online.

You can compare their manufacturer’s suggested retail price, more commonly called MSRP, to see what base prices are the best.

At the dealer, every vehicle will have the MSRP and breakdown of the price listed on the window of the car.

These stickers show the base price, extra features prices, and optional items. If you like the car, odds are, you can opt to get it without the bells and whistles that jack up the price.

Once you’ve found the car you want, at the lowest MSRP, you can make a trip to the dealer. Sometimes, you can take an ad to a dealership and ask if they will meet or beat the price shown.

#5 Not Checking Auto Guides on Used Cars

If you’re looking for a used car, you won’t need to compare the MSRP. However, it is imperative that you check auto guides.

Online auto guides like Kelley Blue Book and Edmunds show you the worth and price of the particular vehicle you’re looking at. Typically, dealers use them to price their used inventory.

While looking at a used vehicle, make sure you have the value from the auto guides with you.

If the price is over the amount you have listed, it is most likely being jacked up. Use your information to try and take the price down.

If the dealer is unwilling to work with you, simply move on to another vehicle or dealership. By doing this, you’ll be able to save the most money on your auto loan.

#6 Not Knowing the Value of Your Trade-In

Perhaps, in getting your new vehicle, you want to trade in your current vehicle to sweeten the deal and take a smaller auto loan out. Many people do this.

However, in some cases, people do not know the true value of their trade-in. This could cost you thousands of dollars in lost money that you could have put towards your new vehicle.

When you’re preparing to deal with a trade-in, know its worth.

That way, when the dealer offers you a price for your trade-in, you know what is a good vs. a bad deal.

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#7 Not Having Your Income Verified

You need to know what your income is before you apply for an auto loan.

Your income, or the money you bring in monthly or yearly, is what will determine your loan amount and how much you can afford.

When entering a dealership, make sure that you have proper documentation of your income.

This will ensure that you get a loan offer that is indicative of your financial circumstances and abilities.

Verification of your income can make or break your chances of getting the loan that best works for you.

#8 Getting Pressured Into a Deal

When you buy a car, you should never feel pressured into a deal that you do not feel entirely comfortable with.

If you’re in a situation that does not feel right, walk away.

Do not feel pressured by a salesman or dealership to get an auto loan that doesn’t fit your needs or wants.

By walking away from a deal, you can open up doors and find another auto loan that works for you.

#9 Focusing on the Monthly Price

When you’re in the middle of the car-buying process, you may be hung up on the monthly price rather than the total price of the vehicle.

Only paying attention to the monthly price, rather than the total price, opens up an opportunity for the dealer to tack on hidden products.

For example, if you say you want a very specific monthly price, the car alone may come out to less than that. But the dealer might tack on extra fees, such as an extended warranty, that will elevate the monthly price to the specific one you request.

It will appear as though you’re getting a deal, when in fact, they are making more money off of you.

Pay attention to the total price and do not accept hidden fees.

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#10 Ignoring Your Budget

Do not ignore your budget, there is a reason you have one.

Sometimes, people can get caught up in the car they’ve been dreaming of, and they don’t pay attention to the price.

The car you want may not be the car you can have. Or you may want a vehicle that allows you to put your money toward other things, like your retirement fund or a savings account.

Make sure to work with your budget, rather than against it. It will ensure that you get the auto loan that best compliments your financial needs.

It’s Time to Get the Best Auto Loan for You

Now that you know what not to do, get started with doing what you should. Take advantage of the resources available to you and avoid these common mistakes.

Try using LendingArch, Canada’s best loan comparison site, which allows you to get a headstart and see the loans you may qualify for.

Are you ready to find the right auto loan for you? Get started here!

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