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5 Common Car Loan Mistakes That Most People Make

Purchasing a car can be an excellent investment. But, before you head to the dealership to find your dream car, consider the loan you’ll obtain. In fact, one of the most common car loan mistakes people make is that they don’t get approved for a loan first. Most often, these loans are readily available, but that doesn’t mean just any loan is going to be a good investment. In all situations, decide based on your financial health and needs. Take your time choosing the ideal loan before you think about your dream car. You will appreciate it after you secure a loan that’s affordable and the best option out there. To do this, avoid these very common mistakes.

1. You Don’t Know What You Can Afford
Stepping foot onto a car dealership’s lot without a solid understanding of what you can spend per month on a car loan is always a big car loan mistake. Even if you know the salesperson, he or she has a single job – get you into a car. They will sell you the most expensive car they can, too, but you need a car that fits your budget.

Here’s What to Consider:

  • How much of a monthly payment can you afford? Think about all of your expenses and your budget.
  • How much of a down payment do you have? This helps lower the amount you will finance later.
  • What is your upper limit no matter what? This is the number you simply cannot go above and make payments comfortably.

You can determine this information at home. Create a budget for the month. Factor in all of your expenses. Then, determine what is left over to cover a car payment.

2. You Don’t Have a Loan Before You Visit the Dealership
Another car loan mistake many people make has to do with where they obtain the loan.
Most of today’s dealerships have onsite financing options. These finance managers work with a single lender or they will try to get you qualified for a loan from a group of lenders.

In all cases, they are not in it for you. The finance manager at the dealership wants you to get approved but is not necessarily interested in helping you find the lowest interest rate and best terms. Some receive a commission from the lenders they represent. This gives them no incentive to help you save money.

This is What You Should Do:

  • Talk to Your Local Lender
  • Get Pre-Approved for a Loan

This information can help you keep your monthly payment in line with your goals as well.

3. You Haven’t Looked At The Details
As noted, it is best to obtain a loan before you head to the dealership and you should consider Best Reward as the go-to solution for you. However, you should compare lenders to find out who is going to offer you the best terms.

While you may like a lower monthly payment, paying a bit more and getting a lower interest rate can help you save thousands of dollars over the life of your loan. For this reason, it is ideal to compare lenders before making a decision

Look at the Following Details:

  • Total Amount Approved
  • Monthly Payment
  • Interest Rate
  • Length of Loan
  • Down Payment Requirements

4. You Don’t Know How Long You Will Be Paying
One of the ways lenders work to keep your monthly payment down is to extend the term or length of the loan. This can be a good thing. If you need a lower payment, a longer term on a newer car is worthwhile. But, the longer it remains in place, the more you will pay for the loan overall. Most cars are not worth much after the end of their long-term loan either.

When Comparing Loans, Consider the Following:

  • What is the length of the loan the lender is offering?
  • Are you able to pay it off? Ask about any prepayment penalties.
  • Can you afford a shorter-term length? If so, this could help you save thousands of dollars over the life of the loan.

Most lenders are flexible. They want you to be happy with your interest rate, term length, and monthly payment.

5. You Are Not Making a Down Payment
Sometimes you need a car and you do not have much – or anything – to put down. However, putting even a small down payment on the car helps in several ways.If possible, consider your options. Then, compare the benefits.

  • If you make a down payment, can the lender provide a lower interest rate?
  • How much of a lower monthly payment can you get with a $1,000 down?
  • Does making a down payment impact the amount you can borrow?

Taking these steps can help get the car loan you desire that’s also affordable for you. Before you decide it is time to buy a car, find out what you qualify for with a car loan. It takes just a few minutes to apply, making it a simple step in the process.

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