Mistakes Many Car Buyers Make

We all want to get a good deal when buying a car. Most of us will haggle with the car salesman to get the better price, and we think that we've gotten a good deal. However, many people lose a lot of money during the financing portion of car negotiations. If you want to get the best deal when you buy a car, you need to make sure that you pay attention when you get your loan, and take care to avoid these common car finance mistakes.

Not Shopping Around for Car Loans

Financing a car loan at the dealership can be convenient, but it's usually not the best way to get a good deal. You can get the same loans that a car dealership will get you by going to the bank yourself and applying. However, when you go to the bank to take out a car loan, you're not going to be paying the car dealer a commission in the process. To get the best rate, find your loan yourself, and compare quotes before you decide on which loan to take out. If you get to the car dealership and they have a special incentive where you can get a better rate than you were able to find, than you'll still be able to take it.

Rolling over an Upside-Down Car Loan

It may seem tempting to go out and buy a new car before you have paid off your current car loan, but think twice before you do. Find out if you have equity in your current car first. Would you be able to trade in your car for the amount that you owe on it? Many dealerships would be happy to trade in your car that you are upside down on in order to upgrade you into a newer car, but you will pay by making a higher payment this way. If possible, try to pay down your loan before buying a new car, so you won't be digging yourself further into debt when you purchase your new car.

Buying "Extras" that You Don't Need

Before you sign your financing contract, be sure to read it over carefully. Dealers commonly try to make money by adding extras into your car purchase, like rust-proofing, service contracts, and extended warrantees. Most of these extras are not necessary. If they weren't a good deal to the dealers, they wouldn't offer them. Be willing to say "no" when you get to the financing office and you are being offered these extra items.

Focusing on the Monthly Payment Rather than the Price

At the car dealership, most salesmen try to find out what sort of monthly payment you would like to pay. This is the wrong way to go about buying a car. Focus on getting a good price for the car first, and then worry about the monthly payment. If you arrange for financing before you step onto the lot, you should already know what kind of monthly payment you will get for a certain price range. A dealer can get your monthly payments down by extending out the time that you have to pay back a loan. Some dealerships even offer eight-year car loans. By focusing on the price of the car rather than the monthly payment, you will end up paying less over the life of the loan.