Get a Loan Approved First
Getting the loan approved before a car dealer makes you fall in love with an SUV with a sunroof and leather seats is crucial. You might want to pay a bomb for the car if you fell in love with it and live frugally because you’ll have to pay off the debt in the coming years. Check your credit score and decide if you should go for a credit loan before you are serious about buying a car. If your credit score is low, you may be charged a higher interest rate that is not in your best interest.
Don’t Buy add-ons at the Car Dealership
After you have purchased the car, the car dealer may take you to his office and start offering you gap insurance but he won’t say it straight away. He’ll paint a picture of how a tire protection plan, extended warranty, or paint protection plan can be a great add-on to your recently bought car. Don’t go for it especially if you are financing the car through another lending company. If you want to buy gap insurance talk to your car-loan lender about it and see if they can incorporate that.
Don’t Get Seven- or Eight-Year Car Loan
It might look thrifty at first to get a seven years or longer car but do you know how dangerous it can be. The seven-year loans may charge a higher interest rate because from the investor’s perspective a long-term loan that they are giving you is riskier. You also pay higher interest in the first few years which means that most of the principal amount remains unpaid for a long time.
Buy Used Cars
Used cars that were driven a hundred thousand miles can be driven another hundred thousand miles without any issues. The second-hand car market is risky but if you can purchase a car in good condition at an unbelievably low price, you’ll get rewarded for taking that risk. It can save you a lot of money and you probably don’t have to tap into your retirement funds to get to drive a fancy new car.
Walk Away
Surprisingly a lot of people find it very difficult to walk away even when the car-dealer is not ready to sell at a fair price. This is because they either get emotionally attached to the car or are too tired of all the negotiation and car buying process. You should be willing to walk away and buy the car only if the offered price is fair.
