car-1881430_640One of the worst mistakes you can make when you are shopping around for a new car is to start your search without knowing exactly where you stand on getting a loan to help you buy the vehicle.

Walking into a car showroom without having your finances sorted leaves you vulnerable to taking a less favorable deal and you are in a better position to negotiate when you have firmed up your finances beforehand.

Here is a look at some of the classic errors that car buyers commit on a regular basis so that you can avoid making the same mistakes, including an insight into the relevance of your credit score, and some classic sales tricks to watch out for when you are negotiating a deal.

On solid ground

It is always a good idea to check your credit score and file on a regular basis so that you can see what lenders will be looking at and know how good your credit standing currently is.

Your credit score acts as your passport to better interest rates on an auto loan if you have a good number and can demonstrate an ability to keep up with payments. If your credit score is lower than ideal it doesn’t always mean you can’t get a loan at all but it will have a big impact on the terms you are offered when trying to complete a car purchase.

It makes a lot of sense to check your credit score before you apply for a loan and it definitely helps to know where you stand on your loan options before you even start looking for a car to buy.

Negotiating the right rate

It is important to identify how eligible you are for the best loan rates before you start your search for a new car because you can then have a more meaningful conversation with the car salesmen, who might otherwise try to sign you up to a loan that pays them some commission but could potentially be more expensive for you than your credit standing warrants.

Car loan rates can be quite low at the moment but you need to have a good credit score to be offered the most favorable terms. If you have a slightly lower credit rating you will probably be viewed as a slightly higher risk and might be offered a loan at a higher interest rate to reflect this.

It might also mean that you have to pay a larger down payment or even need a cosigner with a better credit score in order to get the financing.

The main point to remember is that if you know your loan options ahead of any negotiations to buy a car this will instantly make you a more savvy car buyer and reduces the prospect of being offered a deal that is not the best you could get.

Focus on the windshield price

Another sneaky car dealer trick that you need to watch out for is when the salesman asks you how you are willing to pay each month on finance rather than how much you have to spend on a car.

The problem with focusing on the monthly payments as the basis of your negotiation is that not only will you be more likely to end up being persuaded to take a deal that is strikingly close to your specified budget, but it will also mean that you could end up paying too much for the car as well.

It is not uncommon for a salesman to offer you a deal that seems reasonable and the monthly payments are affordable, but that could be down to the fact that they are quoting you for a 72-month term.

If you take a finance deal that is over that sort of length of time you will be keeping the monthly payments down but the sting in the tail is the extra finance costs attached to borrowing money over such a long period of time.

The ideal term for an auto loan is three years, so work out what you can afford based on this length of time. It will lower the amount you can afford to pay for a car but buying a more expensive model over 5 years or more could end up costing you thousands more in interest charges.

Getting pre-approved for a loan beforehand is a great way to keep control of your budget when you go shopping for a car, and it will reduce the prospect of making an expensive financial mistake.