Car Buyers’ Lack of Knowledge is Costing Them
Capital One Auto Finance recently released the results of its annual “Rules of the Road Survey”. They found that while most car buyers are taking steps to prepare themselves for their auto purchase, they’re still probably paying more than they should.
Why is this? Even though 70% of car buyers are doing their research and finding the best prices on their desired vehicles, they aren’t doing the same when it comes to auto financing.
Nearly 60% of auto buyers didn’t discuss financing options with anyone before making their purchase. And even after completing their purchase, nearly half of borrowers didn’t know what interest rate they were paying on their car loan.
Trust us, if you don’t know what interest rate you’re paying on a loan, it’s almost certainly too high.
Capital One’s survey also found that nearly half of car buyers didn’t factor in the costs of things like maintenance, repairs, parking and registration when calculating the cost of vehicle ownership.
The survey takers recommend that car buyers “treat the car-buying process as two separate negotiations.” That means think as much about your vehicle financing as you do about the vehicle itself.
Another recommendation was to check your credit rating. Only one-third of survey respondents checked their credit score before making a vehicle purchase. It’s essential that borrowers do this before applying for any major loan; we recommend pulling your own credit report at least 3 months before a major purchase so you have time to correct any inaccurate or outdated information you may find. (See our “Consumer Guide to Good Credit,” available as a free .pdf download, for complete information about accessing and correcting your credit report.)
Not taking the proper steps to prepare for an auto purchase can mean paying thousands too much over the life of an auto loan. What good is it to negotiate for the best price for a car when you’re just going to give those savings back to the dealership by paying too much for auto financing?
For more on being successful in the auto buying process, check out our “Deals for Wheels” seminar material, available free here in the FIT Academy eBook collection.
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Great article. People don't take the time to look at financing and how much it affects you financially. There are better ways to buy your vehicles without having to give your money over to the bank.