Thinking of Buying a Car? Make Sure You Don't Overpay
» Posted April 11, 2018 Resources | Share This Post
Most people cannot afford to purchase a car outright and instead must borrow to buy a car. This is one reason why it can be so upsetting when a car turns out to have serious problems. You may have a defective vehicle that you can barely drive or that's in the repair shop all the time but will still have to make car loan payments on it. Because of the serious problems and financial loss that can result when your vehicle turns out to be defective, it's important to contact a Los Angeles lemon law attorney for help as soon as possible.
Unfortunately, even in a best case scenario when everything goes right with your vehicle, auto loans can still be expensive. One big part of the reason why car loans can often be very costly for consumers is that most car buyers do not shop around for their auto loans.
Most Car Buyers Don't Shop for Car Loans
Marketwatch recently reported on the problem of car buyers not shopping around for a car loan. According to Marketwatch, while 92 percent of consumers indicate they always look for the best deals while shopping, consumers do not necessarily look for the best deals when borrowing.
This can be a big mistake because car loans from different sources can have very different terms and some loans may be much more costly than others. As Marketwatch explains, the majority of new car buyers overpay for car loans. A total of 25.22 percent of car buyers overpaid by less than 1 percentage point compared with the interest rate they should have gotten due to their credit. Another 11.27% overpaid by between one and two percentage points. Finally, 17.52% of car buyers overpaid by more than two percentage points.
There is a measurable difference in the amount of money that will be spent to repay your car loan if your interest rate is much higher than it could be. The example Marketwatch gave was a man who took an $18,033 car loan for a new vehicle purchase, as this was the average purchase price for vehicles included in the research. If the buyer agreed to pay 5.85% interest but would have qualified for a 4.2% interest rate from a different bank, the buyer would end up paying about $1,000 extra over the life of the loan. This is a lot of money to waste due to choosing the wrong auto loan.
Borrowers should avoid this by comparing all of their options, not just accepting the lender financing deal. Banks and credit unions, for example, may offer a loan with more favorable terms.
Of course, even if you get a great deal on a car loan, you still could end up facing financial loss if the car you buy turns out to be a defective one with serious problems. You need to know how the law protects you in these situations so you should reach out to a Los Angeles lemon law attorney for help.