Buying a Car for the First Time: Auto Loan Mistakes to Avoid

Getting a first-time auto loan can be a pretty exciting experience for a lot of people. While a first-time auto loan can give you the benefit of owning your own car, it can also lead you into a fair amount of grief if you are not careful as well. Here are a few common auto loan mistakes that you will want to stay away from.

Rushing Into the Deal

The biggest mistake that most people make their first time is rushing into the deal. Car dealers are all about getting people to act on impulse. They want you to leave with a car. Many people start to feel the emotions that the car salesperson is playing on, and they start to agree to anything. Therefore, many people agree to terms that they never would have agreed to while thinking rationally. Do not listen to the car salesperson who tells you that you have to buy today to get the deal. Most of the time, they could have given you that same deal two months ago, and they could still give it to you tomorrow. Do not ever let the so-called sale influence you into making a decision on a car or an auto loan.

Agreeing to Questionable Loans

The most common form of auto loans are fixed-rate loans that go over a certain period of time. You have the same interest rate throughout the loan, and you make the same payment every month. Most of the time, this is going to be your safest bet and help you manage your monthly budget. However, sometimes, they try to sell you on an alternative loan that is not in your best interest. They may try to get you to agree to an interest-only loan or an adjustable rate loan that can really hurt you. With these loans, the interest rate could change every month, or you could still owe a large balance at the end of the term. Stay away from these questionable loan programs and make sure that you understand all the terms in the loan. 

Not Getting Gap Coverage

When you buy a new car, the value of it will depreciate greatly in a short period of time. Even though you owe the full purchase price on the loan, the value of the car is worth less than that. If you are in an accident, you can actually be "upside down" on the loan. When you get a loan for a new car, they give you the option to get gap coverage as well. This will cover the difference between the value of the car and the amount that you owe on your loan. If you can get gap coverage, it is usually in your best interest to do so. 

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