So, a customer has found the perfect car to buy and zoom around in, now the only tiny hassle is obtaining the finance for it. But lo and behold! even that has been sorted out and the financing has been obtained. But that doesn’t mean that it is going to be a smooth sailing from now on as mistakes while obtaining car loans can cost customers dear. Given below are some of the common mistakes that are made while procuring car loans from either banks or dealers.
Not researching thoroughly
This is probably one of the biggest mistakes that customers make. The first deal that customers know of is usually not the best deal available. Some deals offer ‘freebies’ such as registration package, insurance and such but customers should know that these ‘freebies’ are in fact just a cost that is hidden elsewhere, such as in rates of interest. Also, there is a greater chance of customers procuring better deals from the bank they usually work with rather than dealers or through in house financing.
Allowing dealers to complete all the legwork
This is another mistake that customers should avoid like the plague. Allowing dealers to complete all the necessary paperwork may actually seem tempting as it reduces the burden on customers, but they should not yield to this. Doing so will not allow customers to actually research and find the best rates. Dealers usually have tie ups with certain banks that may charge a higher rate of interest. Plus, dealers require commission and in order to do so they may entice customers into procuring additional deals that are highly unnecessary.
Opting for a lengthy repayment tenure
The common misconception that most people have, is that a longer tenure will result in easy payments. This is not true. A longer tenure will only result in a higher payment. This is because, with an increase in tenure, the amount of interest that is paid overall also increases. Cars are depreciating assets, which means that their value decreases over time hence paying a high amount for them is not financially advisable. Therefore, customers are always advised to choose a short tenure even if it is not very easy to pay for the same. By doing so, they can save up on a lot of money that would have otherwise been used to pay for interest.
Making a small down payment
The amount paid as down payment sets the tone for the entire amount to be repaid and also the interest rate. Paying a small amount reduces the equity on the house and the amount to be repaid is also quite high. Therefore customers are urged to pay a large down payment and therefore reduce the burden of loan repayment.
Opting for a popular choice
The choice of loan, like a car should not be done blindly and following the herd in this aspect is not a good idea at all. Certain deals may have worked out well for some, but this is not the case for all. Just because the next door neighbours swear by a particular bank or dealer, the same choice may not be the best for everyone. Hence, before opting for a particular offer, customers should see if those deals work out for their financial standing and if it is beneficial for them in the long run. Only then, should they go ahead with the offer.
Cars are one of the most coveted possessions in the world and especially so within the Philippines. There are numerous banks and dealers offering loans and financing for Filipinos who want to purchase their dream set of wheels. Although there is no hard and fast rule regarding financing options, the above set of points are essential for customers to adhere to so that they procure the best deal possible and do not end up paying more than what is required.…