Here are the general errors buyer commit while completing the paperwork and the solution for them.
1. Not checking personal credit rating: Many buyers go to the dealer without first checking their credit score. This is the single most important factor for credit companies while giving you a loan. It will decide the amount of interest you have to pay and so you should keep it in good condition before going to buy your car.
Solution: You should order your credit report and see if anything comes in the way of you getting a good rate while getting your loan. The credit bureau will tell you how you can correct the error. You can check them at following address;
Equifax phone:800-685-1111
Experian phone:888-397-3742
TransUnion phone:800-916-8800
2. Overspending at dealer: Many customers are tempted to overspend once they are at the dealership.
Solution: Fix a budget while going at the dealership. Many experts suggest that your monthly car payment and other related expenses should not be more than 20 percent of your monthly income. Always remember that the car dealership salesperson would like you to get a deal which gives them the biggest margin and profit however you need to do your research first and go along with your specific requirements.
3. Researching current interest rates: Many customers go to the dealership without researching the current interest rates in the marketplace.
Solution: Internet is a great tool and you should always spend some time researching the interest rates you might qualify for before going to the dealership.
4. No prior approved auto loan: Most of the customers go to their dealership without a prior approved auto loan in hand. Generally they are not aware of any such option or they believe that the dealership will provide them with the lowest loan which is totally wrong.
Solution: You should go with your own no-obligation loan before going at the dealership. This will be a great negotiating weapon and would give the signal to the dealership that you have done your research. Remember a 60 month loan on a purchase of $25,000 vehicle at 4.49 percent can save you as much as $1,500, compared to a loan at 6.50 percent over the total life of the loan.
5. Discounted financing or rebate: Many customers believe that it is better to go for discounted financing than to go for a rebate. However the net savings might not necessarily be better.
Solution: Do a proper calculation and see which particular option would be better.
For a 36 month car loan
| Items | Rebate | Discounted Financing |
|---|---|---|
| APR | 0% | 3.99% |
| Cost of the Car | $20,000 | $20,000 |
| Minus Equity for trade-in | $4,000 | $4,000 |
| Less rebate | $0 | $2,000 |
| Final amount to finance | $16,000 | $14,000 |
| Monthly Payment | $444 | $414 |
| Total Cost | $16,000 | $14,878 |
| Final Saving | $0 | $1,122 |
6. Confusion caused by F&I officer: Many times the F&I officer will try to confuse you by mingling two different parts of the deal. Ex: “I can give you a vehicle with much lower price but this interest rate would be the best we can do”.
Solution: This is just a technique to confuse the buyer and take him away from the current issue. Always remember that a car buying process is generally made of three parts: the vehicle price, financing of the vehicle and trade-in value. Avoid getting into a discussion about how much monthly payment you can afford. Even a few dollars change in monthly price can cause the actual price of your vehicle to be more by a few hundred dollars or even a thousand dollar than the actual price in market. While financing focus on the APR instead of focusing on the monthly payment.
7. Mental tiredness: By the time the customer reaches the stage of finance department they are mentally tired after doing all the research checking the vehicle,test drive, talking with the salesperson and finalizing the deal that they do not pay attention to the fine print. The dealership might try and include extra items which you might not want like extended warranty, rust proofing etc.
Solution: If you are very tired and feeling some kind of mental exhaustion you can take a break of few hours before you sign the final papers. While signing check all the extra charges and if there is any sudden extra fees question it.
8. Pressure by dealership staff: With so many people involved in a single deal you might feel that you are somehow pressured or confused by the end. Still many customers go ahead and sign the deal.
Solution: You should always remember that buying a car is going to be a big investment and is always a good portion of your income. If you at any point feel pressured you can calmly say them your viewpoint on it and always remember that a buyer should always be in control and not the seller. Also remember that there is no cooling off law for cars(the period within which you can return the car and get your money back).
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