12 Mistakes To Avoid Making When Getting A Car Loan


If you look at statistics for new motor vehicle sales in Canada, you will notice a slight downward trend in the same. This may in part be due to the fact that buying an automobile can be expensive especially when you’re part of a struggling global economy!

Further, according to an article published by Automotive News Canada online, this may also be because the country’s youth find it simpler to stick with cab and rent-a-car services. This may be in part because of horror stories about car loans that take forever to pay off and others where you almost end up doubling the initial costs.

Is It Really That Bad?

If you’re wondering whether it’s really so much trouble taking out the right car loan and managing your payments, we can tell you this; it really isn’t.

The thing about car loans is that a lot of people tend to mistake them for some magical solutions to not being able to afford the full payment on a motor vehicle on the spot. The excitement of buying a new car has often led folks to miss out on the fine print, so to speak, and opt for the wrong kind of auto loans.

Though the right auto loan could seriously facilitate you, what you need is to do your due diligence. If you’re looking to find a viable auto loan, maybe start by avoiding these sixteen mistakes!

Not Prioritizing Financial Planning


People often start thinking about what cars they want to buy well before they even consider their finances. In some instances, they even lock in their choices, connect with dealers and start the process of buying a vehicle without looking in to see if their finances are in order.

The price or cost of the car you choose will obviously be a determining factor in loan particulars such as duration or monthly payments. For this reason it helps to be crystal clear on your finances before you think of going vehicle shopping.

Think of your credit scores, monthly budgets and other available financing options. Once you have a clear sense of the kind of finances you’re working with, proceed to shopping for the right car. This way you’ll know exactly what kind of vehicle you can comfortably manage to pay for.

Not Having Your Finances Preapproved before Car-Shopping

If you’re looking to buy a car, being clear on your finances is sometimes not enough. It is important to have a preapproved financial arrangement ready before you connect with your local dealership.

This ensures that you are not bound to the restrictive payment and loan options suggested on the spot. Further, if you need to negotiate or research, a preapproved offer will give you a benchmark to work with.

The less you pile on to the car procurement process the better. Having your offer preapproved is hence recommended.

Not Understanding How Finance Works

If you want to pick the right auto loan, one of the things that is important is to understand how financing works. An article posted online by the US News & World Report elaborates on how having a basic understanding of financial terms and terminology can be helpful.

Being clear on what financial terms and terminology imply helps you better understand the parameters of the auto loan you choose thus allowing for you to make a better choice.

Using Monthly Payments as your Prime Deciding Factor

Sure monthly payments and finding those that suit you is of utmost importance when you’re looking for an auto loan. At the same time, monthly payments are by no means the only determining factor as to whether the auto loan you go for will be appropriate.

People often make the mistake of getting roped in to the wrong auto loans because monthly payments seem too good to pass off. Loan durations as well as other additional costs that are added to your total (such as interest rates) must also be taken into account.

Don’t discuss payment options with your dealer. Discuss vehicle price instead.

Dragging Your Loans


Another problem that arises from making monthly payments your prime focus is that most loans offered to you will be longer than what would be beneficial.

Taking a long term loan because you feel it would make your monthly payments manageable is a bad idea. Firstly, longer loans mean more time for interest costs to rack up. Do not underestimate how much the interest alone could spike the overall cost of the car you buy in such cases.

The other problem with longer loans (with seemingly better monthly payments) is that in most cases, due to the added risk, interest rates are a lot higher.

The result of both these is that you will end up paying a whole lot more for your vehicle than you would with a shorter loan. Further, the value of your car is bound to depreciate and in the case of theft or an accident, you’ve had it.

It’s best to clear your loan payments as soon as possible so go for the kind of loan that allows that.

Not Considering Additional Costs


Many car dealers will try to throw in additional costs under the guise of warranties, sweet deals and such. Though these might seem like a great idea when you’re buying a car, what they will do is bump your overall price up by a fair bit.

This in turn increases what you owe by way of monthly payments (something that might not be highlighted to you at the time). Alternatively, it could result in you having to go for a longer loan than was necessary.

Don’t just go for whatever your car dealer tries to sell. That’s his/her job. Consider whether the additional offers really add value to your deal before you opt for them.

Neglecting Your Credit Scores


Your credit scores can really affect a number of aspects of life whether you know this or not. One way this is so, according to an article published by the Forbes magazine online, is in the way those offering loans see you.

Poor credit scores will likely result in higher interest rates if not loan rejections altogether. For this reason, if you’re looking to buy a car especially using an auto loan, make sure your credit scores are in the green.

If they aren’t, spend some time getting them up to par before going shopping for a car or a car loan.

Underestimating Down Payments

One of the best things you can do when working to get a car loan is to pay as much as possible by way of down payment. Unfortunately, many who apply for car loans do the opposite. Where going for larger monthly costs might seem like a good idea, in comparison, making a healthy down payment is a far better approach.

The down payment you make can considerably lower your monthly payment costs, your cumulative paid interest and hence the overall cost you would have to pay for your vehicle.

Cutting it Too Close

Many of us can relate to the experience of living on a tight month to month budget. The time we get our accounts credited with our salaries usually coincides with the time we start running out of money for the month!

Living like this might lead you to believe that you can budget for a car loan keeping it as close to the red line with your daily expenses as you normally might. The problem with this is that the smallest financial hiccup or bump could send you into a spin. Some examples are a sudden medical or home expense, an accident or even a financial miscalculation.

In any instance, you risk missing a monthly payment, having to pay penalty costs or even having your car reclaimed in a worst case scenario.

Don’t just look to make ends meet. See that you can comfortably make your monthly payments, keep with the rest of your monthly budget and have a tiny bit to spare in case of emergencies!

Sticking Exclusively to Banks

We all know how strict, stringent and dare we say fussy banks can often be about issuing loans. It’s funny how banks work as an institution but we’re not going to get into that right now.

We will say this though; banks do not look to make the loan easy on you in any way (unless you’re someone who already enjoys strong finances). They offer difficult interest rates. Their terms are more about helping them make money than helping your improve your living standards et al.

Of course, banks may also flat out reject your loan application altogether. Don’t make the mistake of thinking banks are your only option. You have other options such as credit unions and car loan services in Canada!

Make sure you take these into consideration before driving yourself mad trying to meet the conditions for a bank loan that will suck you dry in any case!

Not Exploring Online Loan Facilitation Options


Many people feel that they need to visit an office, a bank or some kind of physical commercial space in order to ensure reliability. This is completely untrue.

You have numerous reliable auto loan and easy car finance service providers available online. Many of these companies are far more client centered than your run of the mill loan options. They offer terms and conditions that are viable, help you calculate finance for your car and offer facilitation even if your credit scores are the sort that banks would reject.

Most of these companies operate on a large scale and are legally insured and registered. Before you opt for other means for an auto loan, it helps to research what online options are available to you. Chances are you’ll be pleasantly surprised.

Making Bad Decisions

The best auto loan or auto loan services cannot save you from a bad decision. That one is on you! What we mean here is things like applying for a loan when you can really just save for and pay for your car in a go.

Another bad decision would be to blindly agree to whatever shoddy deal you might be offered in the excitement of buying a new car when you could have shopped for one that would benefit you more. Be smart when you’re going out to buy a car. They don’t call them ‘Wheeler Dealers’ for nothing!

Be clear on what works for you and learn to make the right calls and decisions. If the price is right, your auto or car loan will be well worth the trouble!

Jumping into Things

Last but not least, regardless of where you get your auto loan, you’re going to be the one paying back. It helps to be very clear on exactly what the loan you opt for entails. Don’t shy away from asking questions— double check contracts and seek clarification where needed.

No reliable loan provider will have a problem walking you through your loan options. Jumping into things can be a big mistake so even if you have everything else in order, take the time to go over the fine details before you lock in your deal.

Winding Down

We’re pretty certain that avoiding the mistakes elaborated above will help you find and go for the best possible auto financing option available.

If you require help with your auto loan in Canada, our company offers a range of auto loan and loan facilitation services. These include helping your repair poor credit with the right car loan, car loan calculation and facilitating new car buyers with the process of auto finance.

In any case, just remember that every little aspect of your auto loan and car deal counts. Don’t just go in to a car deal or auto loan application half cocked. Make sure you have everything in order so that the loan you pick is one that benefits you the most!

Apply Now