How to Avoid Overpaying on Your Auto Loan

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - April 11, 2018

Make sure you have a budget ready before taking out an auto loan. No two auto loans will be the same, and there are three things a car buyer should consider in order to avoid overpaying.

Three Things Consider

Keeping an auto loan within budget is attainable. The trick is to look beyond the car’s selling price and consider the long-term costs of the loan. When preparing to finance a car, keep these three things in mind to avoid overpaying:

  1. Think beyond the monthly payment – A lower monthly payment doesn’t always mean a buyer is saving money. Overall cost should be the main focus when choosing a car, not monthly payments. Going to a dealer with a set payment in mind could lead to inflation in the sales price with an extended warranty or add-on products that aren’t needed. Instead, a buyer should get pre-approved for financing, and negotiate on the price after the fact.
  2. The shorter the term, the better – With the average auto loan term around 67 months (5.5 years), more car buyers are choosing longer terms to spread out their payments. While it may seem like the buyer is saving money, the reality is that a longer loan term comes with increased interest charges. A longer term also opens up the possibility of being upside down for a longer period of time. This isn’t ideal for a car buyer with credit issues. Consider a short-term loan to avoid higher interest charges and more time being upside down.
  3. Rate shop and compare – Once a buyer knows their current credit score, and has an idea on what vehicles to look for, it’s time to rate shop and compare numbers. If the buyer has a relationship with a bank or credit union, they should see if it’s possible to get pre-approved there. Getting pre-approved before going to a dealership means the dealer will usually try and find a better rate, which gives the buyer more options. If a buyer has bad credit, getting pre-approved can be difficult, so, typically, they’ll need to get a subprime auto loan instead of a traditional loan.

Getting the Car You Need

Keeping a car loan within your budget is important. There’s more to an auto loan than just the car’s price, so it’s important to consider factors that can affect your finances in the long run. If you’re struggling with credit or finding the right vehicle, let CarsDirect help.

We work with an extensive network of dealers who have the resources to help people in many types of credit situations. Let us guide you toward a local dealer. Fill out our no-obligation online auto loan request form to get started today.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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