Common car finance mistakes and how to avoid them

November 28, 2018

Applying for car finance can be difficult if you have never done it before. You will likely make some mistakes during the process, but this is common and natural. However, there are some that you should avoid making in order to have a successful finance application.

Once you have searched your local car dealerships for a second-hand car that you like and want to buy, your used car search will need some financial backing. If you would like to avoid making the most common vehicle finance mistakes, read on below for some top tips on how to do just that.

You don’t know your credit score

Knowing your credit score is vital when buying a new car. This is because the success of your application depends on how good (or bad) your score is. If you don’t know your score, then you will not be able to contest any inaccuracies.

If you go into one of the car dealerships in Gauteng and surrounds and you do not know your credit score, you will likely not be able to negotiate a better interest rate. And your lender might see you as a “high risk” client, and provide you with an unfavourable interest rate. Take the time to ask for your credit score and call the credit bureau to discuss any information you feel is incorrect.

You rush into a decision

Many first-time car buyers think that, in order to ensure that they find the car of their dreams, they have to act quickly and make a decision on the spot. This should not be the way you enter into any large purchase, especially not one which you will be using for years to come.

You should take your time to research the different cars on offer from the car dealers and keep an eye out for any upcoming sales by looking at motoring news sites. Keep your budget and your financing options at the forefront of your mind when looking at models. Instead of simply rushing into a decision because the salesperson is pushing you, you should spend time looking over each car you like, weighing the pros and cons and waiting for the right deal.

You focus on the payments and not the full cost

When you are looking for your first car, it is very tempting to opt for the lowest monthly payments. And while this might be smart thinking for your budget, you are not looking at the full picture or cost. This can be detrimental to you as it can cause long-term debt.

However, lower monthly payments also mean that the loan lasts for longer. Before you go out and buy a car, use an online calculator to figure out the true cost of the car you want to buy. For example, you will have to factor in the extra fees that the dealership might add on, such as sales tax and a warranty and you will have to consider that you will have to maintain the vehicle and fill up with petrol at least once a month. Car insurance is also an ongoing cost to factor into your budget.

You don’t know what you can afford

This is a common mistake that first-time car buyers make. If you do not know what you can comfortably afford this will make it difficult to say no to a persuasive salesperson. And you might be liable to spend too much

You will need to have a strict budget in mind before you head out to any dealerships to look for second-hand cars for sale. Before you make a decision on a finance package or car, you will need to consider precisely what you can afford. This includes your down payment or balloon payment. Try to think about times when you might be bringing in a lower income due to job loss or if you change positions and might be earning more or less.

You don’t ask for professional advice

Many first-time car buyers take everything upon themselves when it comes to researching the car you want and financing it. But if you feel yourself battling with the certain aspects fo financing or do not fully understand what it all entails, you should ask for professional help.

Asking for professional help in terms of a lender or a financial adviser might even help you to get a better deal. Take all quotes and offers to a financial adviser and ask them which one they feel is the best fit for your current situation. This way, you will not take the first offer that comes your way but you will be able to hold out for one that you can truly afford.

Think smart to drive smart

Buying your first car does not have to be a daunting time. It can be exciting and successful if you avoid making the same mistakes that all first-time car buyers make. Start out by finding out your credit score and then move on to building a budget and doing your research.

Always think about the full cost rather than only the monthly payments and know exactly what you can afford. If you ask for some professional advice, you will soon find yourself driving off in the car of your dreams.

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