5 Car Loan Misconceptions | Consumer Reports

5 Car Loan Misconceptions | Consumer Reports


Confused about your car loan? You’re not alone. In a survey conducted
by Instamotor nearly 60% of US car owners
don’t understand the relationship between
their loan term and interest. Let’s look at five car
loan misconceptions. Myth number 1, it’s all
about the monthly payments. [BUZZER] While it must fit
into your budget, focusing solely on
monthly payments could distract you from the
total cost of your vehicle, plus the interest from the loan. We recommend using TrueCar
or Kelley Blue Book to help compare total car
prices, plus loan interest rates from other lenders. It’ll give you a better sense
of what your dealer is offering. My loan rate is non-negotiable. [BUZZER] Unlike loans from the
bank, third-party loans arranged by car
dealers are often marked up to boost profits,
but those rates are negotiable. Check with several local
banks, credit unions and online lenders such
as Clearlane and E-loan to find the best rates. Refinancing my car
alone is never worth it. [BUZZER] Not true. Refinancing can save you
hundreds, even thousands of dollars. Although interest rates
are low, you still may have a relatively high rate
if your credit score was low when you took out the loan. Refinancing an auto
loan is much easier than it is for a mortgage,
and most likely you won’t incur any fees. I should put down as little
as possible so I can use that money for other expenses. [BUZZER] No way. The less you put down, the
more you’ll add to the loan, leaving you paying
higher finance charges. A low down-payment could also
mean that you’ll end up owing more than the car
is worth, which can be a big problem
if you need to get rid of the car in a hurry, or if
it gets totaled or stolen. We recommend putting
down at least 20% of the cost of the vehicle. When my loan is paid off. It will be the perfect
time to buy a new car. [BUZZER] Think about it. This will be the
first time in a while where you’ll no longer have
to pay monthly car payments. Enjoy it. For more on car financing
and pricing, check out our build and buy car buying
service at CR.org.

About the Author: Michael Flood

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