Should you use an auto loan dealer to buy a car? Automobiles are a very necessary cost of living for many people. Getting from point A to point B is crucial for employment, medical care, education and just about every other function of life. Having said that, we all know that vehicles are expensive and they aren’t getting any cheaper. Most people looking to purchase a vehicle have to get a loan and make payments over time. In fact, according to Heather Long with CNN, about 43% of adults in the United States have an auto loan outstanding. With such a demand, there are a lot of ways to secure financing. One of the biggest questions on the minds of consumers is whether to utilize financing through the car dealer themselves. Here are a number of reasons why this may not be a great idea.
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Things to Consider before Using an Auto Loan Dealer
1. Higher Interest Rates
Too often people that don’t know much about financing handle everything through the auto loan dealer as something of a “one-stop shop.” Most of the time the interest rates through the auto loan dealer are considerably higher than from other lenders because of the difference in interest rates the dealer charges the consumer as compared to how much the bank will charge, according to U.S. News & World Report. In this age of instantaneous information through the internet, why wouldn’t you shop around for your financing? Companies like Auto Loan Express use the power of the internet to connect consumers with multiple lenders at once. If you have great credit, you will be able to find a much lower interest rate, but even with credit problems, you will still want to find the best possible rate. Every percentage point matters on a vehicle because unlike other investments, a vehicle will lose its value over time. Paying off your vehicle as fast as possible by getting the lowest interest rate will save you a considerable amount of money in the long run.
2. More Car Equals Longer Payments
People know what their monthly budget is for a vehicle, and that tends to be the guiding force for what car they buy. The auto loan dealer is trying to sell you as much car as possible at the point of sale. It’s very easy to let your emotions drive your decision-making when you’re looking for a vehicle. This is how people get stuck paying for a vehicle for six years and sometimes even longer! Do your research and get pre-approved for a certain amount of credit if at all possible. It’s better to determine how much car you can afford with your monthly budget over a period of fewer years (three or four) and stick to that dollar amount or less. But remember that the auto loan dealer has a vested interest in financing a higher amount of money for you, making them a very biased lender.
3. Warranty Expiration Period
A warranty on a car essentially keeps you from having to pay for repair costs during a specified period of time. While you are making payments on the vehicle, you definitely don’t want to have to pay for repairs. If you finance the vehicle through the dealership for an extended number of years, you will almost assuredly extend your payments past the warranty. The warranty on a vehicle is usually between three and four years. If you have a major problem after that period, you could find yourself having to continue to make payments on a vehicle you don’t want. But the dealership will absolutely be happy to start charging you to fix the problems that come up.
Get or Refinance Your Auto Loan
The Takeaway: Shop For Your Financing
New and “new to you” vehicle shopping is both fun and exciting, but the worst mistake you can make is letting emotion get in the way of a sensible financial decision. Remember the following points:
- The dealer is trying to drive the purchase price as high as possible.
- Don’t let your monthly budget stretch to several years past the warranty.
- You can and should shop around for auto financing.
When you’ve made the decision to purchase a new car, before you do any shopping or test driving, you should spend a considerable amount of time finding the best interest rate possible. Auto Loan Express is an example of a company that can connect you to multiple lenders in one stop. They can make it simple to review the best options with different lenders and get approval before you go car shopping. After you have found the best interest rate and financing terms, then you’re ready to head to the auto loan dealer.
When at the dealer, make it clear that you have pre-approved financing and give them your firm budget range as a total cost to finance. Also, remember that there are lots of car dealers. Visit multiple auto loan dealer and find the best deal for your money. This is the smart way to purchase a vehicle and get the most bang for your buck. If you keep emotion out of the purchase and use a company like Auto Loan Express to find your best financing option, you can’t go wrong.