The Top Mistakes People Make When Financing a New Car

Financing a new car purchase can be a risky business sometimes. Just about all of us know someone who has fallen prey to a scam of one kind or another, or simply committed themselves to a finance contract that turned out to be terrible value. As a smart consumer, it’s essential that you keep a clear head and avoid the common pitfalls of car finance. We’ve put together some simple tips here to help ensure you have a positive and successful finance journey.

These are three common mistakes that people make when they finance a car . . .

1. Going for the first loan they’re offered - usually at the dealership

Car dealers usually offer their own in-house finance solutions to customers who purchase a vehicle. Car salesmen will often try to persuade a customer to finance their purchase directly through the dealership, rather than shopping around and comparing what other lenders are offering. While this isn’t a universal truth, financing through a dealership is often not the best value solution. And even if it is, you should never commit to a finance contract before you’ve done some serious market research.

2. Getting sucked in by introductory interest rates

This is another easy way to blow the budget when you finance a new car. Many lenders offer a ‘special’ or ‘introductory’ interest rate on their loans, which lasts for a certain period of time. While the rate might seem like great value at first glance, it may turn out that the regular interest rate is higher than competing lenders. Once the special rate expires, you’re stuck with an overpriced loan that will take you several more year to pay off.

3. Failing to use a finance calculator for proper budgeting

Car finance calculators are excellent budgeting tools, but sadly many people still forget to use them. A finance calculator helps you to determine exactly how much money you can afford to borrow to buy your car, and allows to factor for variables like balloon repayments. Budgeting with a finance calculator is the first step toward saving money on your loan - so don’t forget to make use of this important tool.