For most people, buying a new car entails taking out an auto loan. Given how exciting the process of buying a car can be, many people do not tend to pay attention to important details regarding their auto loan which can prove to be an expensive mistake. Here, we have listed the 3 key mistakes that people make when taking out an auto loan.

1. Opting for low-interest/zero-interest loan offers: When you take out a loan, you pay a fee on the sum that you borrow. This feed is called the interest. In the case of a low-interest or zero-interest loan, the interest charge is usually absorbed by the automobile dealer or manufacturer. Essentially, in this case, you pay the same amount of money as you would if you were paying full price for the car, except that this cost is spread over a period of time. So, what’s the catch? The thing is, if you aren’t careful, it can be easy to make the mistake of purchasing a vehicle that is not exactly affordable, simply because you have a zero-interest loan offer on it. Also, in many cases, automobile dealers who offer zero-interest loans build the interest charge into the price of the car. So, if you are opting for a low-interest or zero-interest loan, it is important to work out the numbers beforehand.

2.Opting for a long repayment tenure: If you purchase your car on loan, you will need to repay the loan amount over the course of the loan repayment tenure in fixed intervals, usually every month. The shorter the loan repayment term, the more you’ll have to pay every month to clear your loan, and vice versa. Many first-time car buyers, in an effort to reduce their monthly payout, opt for the longest possible repayment tenure. This can, however, prove to be an expensive mistake since the amount of money you will be paying in interest is likely to exceed even the cost of the vehicle. So, if you can afford it, make sure to opt for a shorter loan tenure. 

3.Not negotiating for a better rate: Something that most loan applicants forget to do is negotiate. If you aren’t being offered the best rate possible and have a good credit score, you can certainly ask for a lower interest rate on your loan. If the bank/credit union or automobile dealership needs your business, they are likely to come down on the interest rate. Remember even a marginal decrease could help you save thousands of dollars over time.

You can avail an auto loan by directly approaching a bank or credit union or the automobile dealership. Regardless of which channel you choose to get financing from, remember that there are plenty of options. So, don’t hesitate to shop around and compare the interest rates and other fees levied by different financial institutions and automobile dealerships. Make sure to only go ahead with an auto loan if you are sure that the monthly payments are affordable.