When you’re shopping for a new car auto loan, there are some things that you need to know. Many people make mistakes when they buy a new car, and these mistakes can end up being very expensive. This article names the three most expensive mistakes people make with their new car auto loan so that people can avoid them:
They Don’t Evaluate Their Loan Options
It is easy to go with a lender you know, possibly even the lender who financed a previous car. However, it’s always best to get several quotes from different companies in order to ensure you’re getting the best interest rate. A higher interest rate could cost you thousands of dollars over the life of the loan. Some websites will even provide you with several quotes from different lenders after you fill out just one application.
Their Down Payment Is Too Low
A low down payment will affect your interest rate if your loan amount is not considerably lower than the appraised value of the car. Lenders calculate your loan-to-value ratio (LTV) to determine their risk in the transaction. A higher LTV will represent a higher risk for the loan company, so they will raise your interest rate. Even if the difference in interest rates is small, a higher interest rate could cost you thousands of dollars over the life of the loan.
They Don’t Buy a Warranty
The worst thing in the world is to have to pay payments on a car that doesn’t drive. Or, even worse than that, to have to pay auto repairs on a car that you’re also making payments on. Do yourself a favor and invest in a warranty. It could save you a lot of money over the life of your loan.
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