Automotive Loans: Top 5 Mistakes When Buying a Car

by Amy Lillard

(1/31/2013) Buying a car can be a stressful prospect. Those looking to purchase and finance a car have consistently made mistakes that can put them in a difficult financial position or, at the very least, make them regret their decision. If you're looking to buy a car and get an auto loan, avoid these mistakes to make the process better and purchase a good car for you.

• Forgetting to research. The more you know going into a purchase, the better shape you will be in financially and mentally. Online research will reveal important information on typical prices, current rebates and incentives, market interest rates, and buyer reviews, all of which can help you make a better car selection and obtain the best price.

• Thinking short term instead of long term. When financing a car, many people opt for less money down, saving money now but increasing the amount paid over the life of a loan. At the same time, buyers will often take the short-term convenience of taking whatever loan is offered by the dealer. Shopping around for loans ahead of time, however, can save thousands over the long-term.

• Thinking monthly payments instead of total cost. Calculating the cost of a specific car, and whether you can afford that cost within your budget, is tricky. Most buyers focus on the monthly payments with a certain car and loan, and forget about the other costs of ownership — gas, insurance, taxes, regular maintenance, and repair. Neglecting to consider these costs can mean purchasing more than you can really afford.

• Focusing on flash. Your car purchase should be primarily based on need rather than want. While sports cars are attractive and seem fun, if you have a large family or a limited budget it doesn't make sense. Alternatively, while bigger cars and SUVs may be popular, if you don't drive very often and rarely haul a lot of people or things they're an expensive impracticality. At the same time, buyers can easily get distracted by specific rebates and promotions, buying a car that may not be ideal for them because there's a deal going on. Instead, focus on what you need and keep other distractions at bay.

• Accepting a car's story. When buying a used car, don't simply accept the history provided by an individual or dealer. Check the vehicle history report and inspection report to ensure you know about any accidents or other damage, as well as any mechanical issues that exist. History reports are available from dealers or Carfax. For inspection reports, be prepared to bring in a mechanic to conduct an examination for any privately sold cars.

Automotive Loans: Top 5 Mistakes When Buying a Car

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Amy Lillard

Automobile Buying/Financing

Auto Insurance

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