Purchasing a car should be one of the most exciting milestones of your life, but one financial misstep could turn it into a nightmare. Unfortunately, good intentions can easily become devastating financial mistakes. By familiarizing yourself with the process of auto financing, you’ll avoid intimidation and ensure that you find the greatest deal possible.
Here are the seven worst financing mistakes you can make when it comes to buying a car.
#7. Not Doing Your Research
Let’s compare buying a car to writing a high school paper. It’s not the hardest thing to do in life, but you’re going to get a failing grade without doing research in advance! Luckily, research is a much easier task than it’s ever been with the help of the internet. There are many free sites offering info on pricing, packages, and other options.
#6. Being in a Hurry
Buying in a hurry can land you in a lot of debt. Even if in a dire situation, make sure not to panic and buy the first thing you see, because you’ll ultimately regret it later without the option to compare prices.
#5. Failing to Budget
While budgeting may take up a lot of time, your financial future will thank you for it. Do not break your pre-decided budget when buying a car, no matter how tempting it may be.
#4. Shopping Payment, Not Price
If you’re after lower monthly payments, you may be thinking that $350 per month is a much better option than $500 per month – even if payments are dragging on longer. You’ll do much better to look at the whole picture, especially considering that a longer loan can increase your interest rate.
#3. Not Paying Attention to Insurance
Just because the payments fit into your monthly budget doesn’t mean you should be complacent. Make sure you know how the insurance rates are going to fit into the big picture.
#2. Borrowing from Your 401(k)
One of the worst things you can do is to dip into your retirement account to pay for a new car. Believe it or not, there are better options available. Time will work against you, and you’ll lose any cushion you have. If you really need that money in a future dire situation, you won’t have access to it and could financially devastate yourself.
#1. Choosing the Wrong Car
This goes along with failing to do your research. With so many choices, you should know ahead of time what your car needs are. For example, buying a seven-passenger SUV when you don’t have a lot of kids to cart around is only going to frustrate you in the long run. This also applies to buying a new car when used will serve you just as well.
If you’re not sure which cars you’ll be approved for in the first place, check out the DriveTime financing page to learn more and get the process underway!