Prior to applying for a car loan, there are a handful of things you need to review, consider, and understand to avoid making a costly mistake.
According to Experian, 45% of new cars with ½ of used cars purchased in the second quarter of 2018 were financed with auto loans – which is a phenomenal number considering the unreliable ups-and-downs of our current economy.
At the end of 2018, more than 7 million Americans were behind in auto loan payments. If you think that fact is staggering, these late payments were by 90 days or more! That’s officially the highest level ever.
If you’re on the market to purchase a vehicle and are seeking a car loan with bad credit, don’t fall for statements that are brushed off. Gathering as much information as you can prior will save you money, time, and can enhance your car shopping experience.
You Can Afford the Car Because You Were Approved by a Lender
It’s risky to purchase an expensive, top-of-the-line car. Especially so if you’re on a budget and are struggling to keep up with your monthly financial obligations as it is. Just because you’re approved for a bad credit car loan doesn’t mean you truly can afford it. On paper, it might look good – but down the line, there’s a chance you might encounter the issue of financial struggle.
Taking a realistic, in-depth look into your income and monthly expenses will broaden your financial awareness. This, in turn, will help you gauge how much you really can afford while having money left over for savings and/or emergencies that may arise.
Thinking the Monthly Payment is the Only Thing Matters
The monthly payment must fit into your budget, not fall into your budget. Focusing only on the monthly payments, as opposed to the total cost of the car for example, you could end paying too much in price and interest charged on the loan.
Putting Down as Little as Possible Can Save You Money
While upfront this statement is true, it’s not a good idea if you’re currently in a financial bind while seeking to purchase a vehicle. The less you put down – whether trade-in, cash, or both, the more you’re adding to the loan. This, in turn, leaves you paying higher finance charges in the long-run. A low down payment can also mean you’ll end up owing more on your loan than what the car is worth. Why? This is because new cars depreciate swiftly after initial purchase. This is known as being “Upside Down”.
Is Refinancing My Car Worth it?
Sometimes, refinancing your car loan can save you quite a bit of money – which is essential if you’re rebuilding your credit or if you’re currently in debt. Refinancing an auto loan is easier than financing a mortgage, without incurring fees.
Research, Compare, Ask Questions
Purchasing a car is a huge step in life; financially, mentally, emotionally. Because of this, it’s highly advised consumers on the market to buy a car do diligent research before committing to anything. Comparing multiple lenders, understanding your finances, having patience and asking questions are all additional keys to having both a successful and enjoyable car buying experience.