Car financing may seem the go-to option if you want to own a car but do not have enough money to pay the cash up front. However, there are certain traps along the road that you need to look out for, even before getting into that car of yours.
Do Not Invest in a Long Term Deal
Dealers often trick their customers into getting a car finance scheme extended over a long period of time, as they claim it will help us with lower monthly payments and hence better handling of the budget. But this is so not true. With a long term deal, you not only end up paying more in the interest but you also have to cover more in maintenance as your car gets older. Furthermore by the time you are done with your payments, the brand value of your car may have dropped, leaving you with a deal that resulted in a loss.
Deals for the Sub-Prime
People having a credit score below 660, often tend to be fooled by dealers who promise a car financing scheme that won’t be based on their credit ratings and thus helping them to get a car even with an average credit score. The thing to look out for in these deals is the large down payment they may require and revolve around interest rates that could be too high to afford, leaving you in a mess over the course of the deal.
The Cost of Extras
When you approach a dealer for car finance option, they offer you extras like tinted windows and rust maintenance. Getting everything under one roof seems convenient and you end up subscribing for these extras. Usually the cost accrued over these extras is “significantly” higher than what you would get at some other place. So always research your neighbourhood before committing to these extra charges.
The Roll-Over Policy
People like to switch their cars frequently and car finance dealers exploit this. By offering a car update over the previous one, even before the deal is paid off, they end up tricking customers into rolling over their remaining payments onto the new deal. This ends up increasing the cost that the customer initially had to pay.
Sometimes the dealer would package more than one deal into a single deal, telling you that through distribution you would be able to save on your monthly payments. But the reality is far from it. Packaging the financing deal of a person having a bad credit along with someone who has good credit ratings, help dealers to secure the deal and earn some commission for themselves. The person with higher credit ratings end up paying higher interest.
Removal from Blacklist
Dealers often tell you that you are enlisted in a credit blacklist and then offer help by having to pay you extra charges. Some of the people falls prey to this technique without knowing that there is no such thing as a credit blacklist.
There are plenty of traps and danger spots that lie in your wait when you try for a car financing scheme. You may not be the smartest of all to avoid them, but educating yourself and questioning thoroughly what you are in for, you can surely avoid these danger spots.