Consumer Watch: Major car loan mistakes
OKLAHOMA CITY (KOKH) —
Cars are getting more expensive, but the need for one remains the same in most parts of the U. S. including right here in Oklahoma. Common car buying mistakes wreck your budget, but avoiding certain common mistakes can limit any money drain.
Paying cash and having no debt is ideal, but the reality for many Americans is that a new car will mean a car loan.
It is possible to pay cash if you look for inexpensive and reliable used cars or buy your new car when the dealership is trying to switch to a new model. This will, undoubtedly, require a long savings plan. If you find that you need a car now and can't fully pay cash, a car loan can work, but always leave a down payment. Don't be tempted by those "no money down" offers.
“That is just a way to rope you into paying more interest over time which is a big way dealerships make money. Pay as much of a down payment as you can afford while still leaving funds for your monthly expenses and other savings, “says Andrew Schrage, Money Crashers.
Schrage says shoppers should try to leave a down payment of 50-percent of the cost of the car. If this is still too much leave at least 20-percent down. This will minimize the amount of extra money you pay in interest over time.
“If you cannot put any money down, and are not in a healthy financial situation, then I would suggest holding off as long as possible-- car pool, use public transportation. Over six million Americans are late on their car payments. Don't fall into that category, “says Schrage.
Shop around for a car loan, and look for affordable and competitive interest rates. Avoid loans with early pre-payment penalties. This way you have the option to pay off the loan in full early without also having to pay any fees. Personal finance specialists say the biggest mistake people make when getting a car loan is not shopping around for the loan itself before picking out the car. Check with different car dealers, your bank, or even credit unions in town to get the lowest interest rate possible.
The recommendation is to contact at least three different lenders before you pick which is the best car loan for you.