Looking for Used Car Financing? Six Mistakes to Avoid
When you finance your next used car purchase, you want to know that you have not only the right car but also the right car loan. Car loans are not all created equal, and you need to know that you have affordable pricing that meets your needs well. As you shop for used car financing, make sure you avoid these common mistakes.
1. Failing to Plan for Used Car Financing
Many car buyers head out to find a car, then only think about financing when they find the car they love. This can mean buying a car that exceeds your budget or getting to the financing discussion only to find that you’re not approved because of a mistake or problem with your credit score. Get financing first, then shop for a car with the confidence that you know how much you can afford. Also, by having pre-approval for your financing, you can negotiate a better offer at the dealership or with a private seller.
2. Taking out Too Long of a Loan
You want to avoid taking out a loan that is too long, because you can easily end up “underwater” in your car loan, owing more than the car is worth. While you can find financing that is seven or even eight years in length, especially for new cars, when it comes to used car financing, look for a shorter loan period. If that means the monthly payment won’t fit your budget, lower your shopping price to compensate rather than extending the repayment period.
3. Sticking with Just One Lender
Loans come with many different terms and offers. When shopping for used car financing, make sure you shop all of your options. Also, make sure those options include online options and credit unions. Members Plus Credit Union has a number of different auto loan financing options for your consideration, which you will want to consider as part of your overall search. You can get financing in many places, not just from the dealership, and often the best terms will come from outside the dealership, so know your options.
4. Rolling Financing into a New Purchase
If you need a new car and already have a car loan on your existing car, you need to be careful. Dealerships are often quick to offer to roll the loan into your current financing. You can buy a new car for $20,000 and add the $3,000 you own on your current car into the loan. While this seems convenient and helpful, the reality is you’ll be driving off the lot in a car that’s worth $20,000 that you owe $24,000 for. That is far from helpful, and can quickly turn you upside down again.
5. Getting Wooed By Deals
Car dealerships are notorious for offering financing deals and cashback offers to help cars move off the lot. While these can be a good option to get a great deal on your next used car purchase, they need to be carefully considered. Online car loan calculators can help you determine what these incentives will really cost you, so you can choose the right deal. You may find that you’re better off financing away from the used car lot after you do the math.
6. Buying Based on Monthly Payment
Your monthly payment is the most important car loan factor impacting your day-to-day budget, but don’t buy a car and get used car financing based on this alone. If the salesman focuses your thinking on the monthly payment, you could walk away with a term that’s too long or a purchase price that’s too high. Negotiate the price of the car and the loan interest rate separately, without focusing too much on the monthly payment.
Used car financing needs to be carefully considered as you shop for a new-to-you car. By doing your homework ahead of time, you can come out on top with a financing arrangement that fits your needs well.
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