The Auto Finance Mistakes You Can’t Afford To Make

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Comparison rate shopping and thorough evaluation of any deal you’re offered are the foundation of any car finance deal. But there are some less commonly referenced and costly mistakes people make during the financing process. Before you sign any financing agreement, here’s what you need to avoid.

The Price Negotiation Trap

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When you’re looking at financing offers, it’s easy to get drawn in by the promise of a lower monthly payment amount. But that small savings per month may cost you hundreds or even thousands of dollars over the life of the loan.

If you let the dealer know what you can afford to pay each month, you’re going to lose valuable price negotiation power. The car dealer may push add-ons and other things you don’t need if they realize they’ve got a cushion between the car’s cost and what you can afford to pay.

Aim to negotiate each area of the deal, such as the purchase price, your trade-in’s value and the loan agreement, separately. By focusing on the different deal aspects individually, you can squeeze the most of the deal in your favor. Make it clear to the salesperson that you will only discuss one part of the deal at a time to avoid giving them an advantage during negotiations.

If you are going to trade in your old car, establish the market value prior to visiting the dealerships. Sometimes you can get more money going through a private seller or using a car buying business, such as Compare prices before selling your old car to confirm you’re receiving the highest possible price.

The Credit Score Slide

You need to know your credit score before you start visiting dealers, according to Bankrate. Use the score to decide whether you can apply for financing at places more likely to offer you a favorable rate than a dealership, such as a credit union or your personal bank.

Even if you want to use dealer financing to take advantage of a rebate or other incentive program, you should apply for pre-approval at other places to get an idea of the right rates for your creditworthiness. By knowing your score and what type of financing terms you can get elsewhere, you can make an informed decision about any financing the car dealership offers you on the spot.

Rolling Add-Ons Into Your Financing

While you may want particular add-ons, such as electronic enhancements and a car alarm, rolling those features into your financing isn’t the best way to go if you can pay for them individually. You’ll end up paying more interest if you inflate your loan by adding unnecessary features into it.

Some add-ons, such as an extended warranty, may be available and cost less if purchased outside the dealership. Research the add-on features you want before going to the car lot to estimate the price and decide whether to get them from an outside source after you buy the car.

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Comments: 6

  1. Willy March 18, 2014 at 8:28 pm Reply

    Hi Im 20 years old. I have a job that I’ve been with for 3months so far and its going ok. I bring home about 350 after taxes a week. I do not have my own apartment I live with my mom still. I have a 2001 Honda civic LX Coupe thats been a good car to me for 3 years but I’ve been having engine leak problems. I got the car checked prob 3x already by the same place. After them working on the car they told me to check the car and if in 2weeks if the car is still leaking then it could be the Crank shaft itself not the crank shaft seal. And if thats the case the dealership said i’d probably need a new car. Is the crank shaft expensive to fix? Also, they stated that my car is still drivable I just have to keep checking the oil at certain points. (Which is a pain in the butt) I made a decision that I wanted to get a car loan. My mom would be my co-signer but the problem is because Ive had a few tickets before my insurance for my current car (2001 coupe) is high. I pay 180$/monthly and an Xtra 80.00 for my insurance. So my bills monthly are already 300$/Mo. (which is including gas for the car). I was looking into getting an auto loan for a 2006 Honda civic sedan 4door USED. (But it looks spanking new) from Atamian Honda Dealership in Tewksbury MA. How do the car auto loans work. The finance person told me he could get me a payment of $200 a month…. but I know theres still insurance I have to pay but how do I determine how much my insurance will be? Will I be able to afford this? I REALLY want a new car.

  2. Donita March 19, 2014 at 9:51 am Reply

    I went to a car dealer because they had the vehicle I wanted and seemed to have a good reputation. I haven’t bought a car on my own or had a new one since 1996. The manufacturers website states 2012 all vehicles no payments for 90 days.

    The salesman totaled the price with fees at $53,670. They wanted a down payment. The monthly payment would be $1,164 @ 72 months totaling $83,808 or $1,319.50 @ 60 months totaling $79,170. I told him what the website said and he denied and went out to get another salesman to explain it to me.

    Do these figures sound right?

    The monthly payments on the website calculator were between $600 – $700. They said I also don’t make enough money for them to run a credit check. I only have a $106 monthly bill I pay. I’ve recently moved and have a new job. My boss and his said my job is secure because of my work ethic and I can go ahead and purchase a car. I’ve also paid $900 rent for 7 years and now am not so I would like to buy the car.

    What is up with the salesman? I don’t want to buy a car I don’t want to get credit for the one I do.
    @ Uncle Bo I don’t know that is why I am asking you condescending dumbass. What I think is going on is on the manufacturers website, not the condescending car salesman who thinks everyone knows what goes on in front and in back of his eyes. I’m sure your family could have done without your side jabs laced with helpful information.
    @ J They wouldn’t tell me the interest rate, as they didn’t want to talk to me or help in ways for me to get the car.

  3. Tami March 28, 2014 at 5:16 am Reply

    I am moving into a new apartment cause my lease is up where I am at. I didn’t want to renew my lease cause I hate where I am currently living. I have awesome credit and found out in Septemeber that Wells Fargo Auto Finance filed a repossesion on my credit. I have never had a repossesion and all they said was sorry they would get it off my credit. But because of their mistake I had to pay triple in deposits in the new place I am moving to. I bit the bullet and just paid it since the apartments wouldn’t take the letter stating Wells Fargo’s mistake. So I am all set to move in. I have paid the deposits etc. and today they called me and said the apartment I was suppose to move in is deimed unliveable cause the currents residents trashed it and they can’t lease it out. They said they have NOTHING available but the bigger floor plan. Which cost more. Shouldn’t they upgrade me to the bigger apartment for the same price since this is their screw up?! I can’t afford to pay mroe. Please help asap. I have to talk to them soon! I am so stressed. I have such bad luck
    I understand it is not their fault but I paid my deposit and have everything (electirc cable etc) already set up for this apartment. It’s not my fault either….but shouldn’t businesses make their paying customers happy? Most places want to fix it not take away!!!! So you think I should suffer for the previous residents trashing it?? Wow! This just happen to my sister and they upgraded to the bigger floor plan SAME PRICE! That’s what a good business would do mister!

  4. Gary March 28, 2014 at 10:10 pm Reply

    Yes, dear fellow Y Q & A regulars, let’s be positive! Whether we are left-wing, right-wing, liberal or conservative, we all have one thing in common: we have this wonderful country, America. We all want things to be better in the US, and it will be the case! Provided we never lose faith and we work hard – that’s the American way, after all…

    Do you have a positive, can-do type of comment to add to mine? Feel free!

  5. Caren May 3, 2014 at 8:32 am Reply

    After not being happy with a car I bought using cash, I traded it in to a dealership and sighned up for this high intrest car loan and after …. I totally regret my decision, big time, and wish I never acted on my desire for a nice car. I make too much money to file chapter 7 bankruptcy because of the car payment and just really want to keep my income vs paying a bank, and auto insurance company alot of the money I earn by working. Is there a way to break free or am I stuck paying? (of course I am willing to give up the car)
    I cannot seem to edit this question
    what I ment was I really want out of this and I make too much money (barely) to file for bankruptcy

  6. Erasmo June 5, 2014 at 6:42 pm Reply

    RE: forgiving student loans (government)

    …………….”America’s now-nationalized student loan industry just reached a value of $1 trillion, according to Citigroup, growing at a 20 percent-per-year pace. Since President Obama nationalized the industry (a tacked-on provision of the Obamacare bill), tuition has gone up 25 percent and the three-year default rate is at a record 13.4 percent.”………………..

    doctors are told by the government how much they will be paid by taxpayers for seeing medicaid or medicare patients.

    QUESTION: why shouldn’t colleges and universities also be told how much money they will be paid for teaching students whose tuition is provided by taxpayers.

    QUESTION: what the heck does student loans have to do with healthcare that it should be in the ObamaCare bill??

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