Making mistakes in your car loan agreement can undo all the negotiating you did to get that great deal. These mistakes could lead to you being upside down on your car loans for an extended period of time, struggling to make payments, or just paying more every month than necessary.
Here are a few mistakes to avoid when figuring out the terms of car loans.
Trying to negotiate the monthly payment instead of the purchase price. Don't tell the sales representative what you can afford to pay every month. If you do, you'll lose the ability to negotiate a lower purchase price. Once the sales rep knows how much you can afford, he knows how much room there is to hide higher interest rates and fees.
Letting the dealer tell you your own credit score. Know your credit score before you set foot in a dealer lot. If you don't know what it is, the sales reps can tell you anything. A great way to check your credit score is to visit FreeCreditReport.com. You can access your report once a year from each of the three major credit bureaus. You can also visit a bank or credit union and apply for a car loan. That way, you'll know how much vehicle you can buy and the interest rate for which you qualify.
Rolling negative equity forward. If you are upside down on a current car loan, don't fold that negative equity into the loan for a new vehicle. You'll be paying interest on that negative equity for the term of the new loan. And you'll be even more upside down on your loan.
While it's true that it's hard to avoid being upside down on a car loan, there are a variety of things you can do to minimize the time you're underwater.
For example, buy a car that will hold its value longer. Once you've narrowed your search to a few different types of cars, go to an independent car information website such as Kelley Blue Book to see the differences in depreciation among your choices.
An easy thing to do is to pay the taxes and fees outright and not roll these additional charges into your car loans. Financing fees automatically put you upside down in the loan.
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