Many car buyers do not fully understand the vehicle buying process and don't know their rights. You should know about the consumer protection laws that protect you and should consult with a San Diego lemon law attorney if you experience problems with a vehicle you own. You should also make certain that you understand car loans before you apply for a loan.
Unfortunately, many people have misconceptions about vehicle loans. In fact, Consumer Reports recently reported that most people don't really understand the loans that they are taking out, despite the fact around 56 percent of new cars and half of used cars purchased in the U.S. in the third quarter of 2017 were financed with auto loans. It's important to know the realities of car loans so you don't pay too much, especially as the average new car loan was more than $30,000 and the average used car loan was almost $20,000.
Seven Misconceptions About Car Loans
Consumer Reports listed seven misconceptions about car loans that many people have. These include the following:
- The idea the monthly payment on the vehicle is the most important factor: It's important to make sure payments fit into your budget, but you shouldn't let the monthly payment be the only thing you consider. You also need to look at the total price of the car and the interest you'll pay.
- You can always afford a car if you're approved for the loan: You shouldn't necessarily borrow the maximum you are allowed as high payments on a car loan could make it impossible for you to accomplish other financial goals.
- The interest rate offered is non-negotiable: Car dealers often work with third party lenders and then mark up rates to boost profits. You could potentially negotiate a better deal to pay less in interest.
- You should put down as little on the car loan as possible: The less money you put down, the more you have to borrow. This means your monthly payments will be higher and you will have to pay more in interest.
- Refinancing your car loan isn't worth the effort: You can often lower your interest rate a lot when you refinance a car loan, which could reduce your monthly payments and could mean you pay less overall for the vehicle since you save on interest.
- The dealer will pay off the existing loan if you trade in your car: Typically, this will mean the dealer will just tack this amount onto your new loan so you'll end up paying it off yourself anyway – and paying much more in interest over time due to the higher loan price.
- You should buy a new car as soon as your loan is paid off: If you buy a new vehicle as soon as your old one has been paid off, you will always have a car loan and never be able to put your money to other uses.
Understanding the truth about car loans will help you to ensure you get a fair deal when you buy a vehicle. You should also make sure you understand how consumer laws protect you if your car turns out to have problems. If you experience issues with your new car, contact a San Diego lemon law attorney for help.