Volkswagen Financial Services- 28 Sep 2018

Avoid These 5 Mistakes When Selecting a Car Loan

In today’s era the car an individual owns tends to define their social standing, and buying the car of choice remains a dream for many. But nowadays, a number of financial institutions provide car loans to help them realise that very dream. There are of course a number of things that one needs to consider before they select their car loan. Concentrating on the best deal for a new car, people often forget to think about the best deal for a car loan. A very common mistake that people make is of choosing the car before analysing the available finance options. Choosing the car first tends to make people more susceptible to accepting less-than-stellar loan deals.

Some of the common mistakes that one needs to avoid before choosing a car loan are:

Not Shopping Around

As already mentioned, the smartest thing that a prospective car loan applicant can do is doing their homework before selecting a vehicle. While tracking down a good deal on a new car is very important, it is even more so, to arrange reasonable and affordable financing. More often than not, buyers focus mainly on finding a car and do not take enough time to shop for the best car loan deal. Then again, there are those who jump at the mention of dealer financing. The fact however, is that captive finance institutions like Volkswagen Financial Services, present at the dealership, offer the best deals on car loans for their group cars.

Selecting the “No Down Payment” Option

Not having to make a down payment on a car sounds very tempting. It means that you can drive away your new machine without having to pay a single rupee. The fact is that this deal is more like a ‘less now, more later’ deal. Zero down payments basically implies that you will be paying more on future EMIs resulting in a higher interest outflow. Please make sure you read about certain conditions like the Processing Fees, Foreclosure charges, Part and Pre payment options

Not Selecting the Shorter Term and Focusing Only on the EMI’s

Spreading out a loan over a longer period of time ensures lower monthly payments, but in the end you will just end up paying more than what was necessary in terms of the interest. When applying for car loan, try to choose the shortest term that you are comfortable with to minimise interest outflows and maximise loan benefits. That said, with the large number of loans available in the market today, it should not be too hard for you to find the one that is perfect for you.

Selecting the Lowest Rate of Interest

The financer providing the lowest interest rate is not always the best option. You should also check for bundle of services provided along with the loan. e.g.:

Financer

Interest Rate

Bundled Services

Financer 1

9%

Not available

Financer 2

9.75%

Insurance, Extended warranty, Car servicing

Financer 2 is a better option even though the interest rate is high. There are other value added services provided by financer 2 which save huge money in longer run. Volkswagen Financial Services provides such bundled services along with loan.

Going with the ‘Gut’

There are instances when you have an iron clad limit to the financing that you want to go for. But sales talk is designed specifically to break down that resolve. A number of deals or offers might be offered to you and you might find your resolve slipping because it’s just about a little more money. Sometimes, excitement may make you stretch your pocket and buy a car for which you have to spend a little more than your original budget. Going with the ‘gut’ might be a great option for many situations, but not car loan. Assess everything in a logical manner and keep your emotions in check.

Being aware of these five common car loan mistakes means you'll be prepared to go into the dealership with confidence knowing you can buy your car without accidentally overpaying for it.

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