The way to choose a car loan

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Car loans are definitely less expensive than home mortgages, student loans, or other kinds of loans. So why do a lot of people end up defaulting and losing their cars? Find out these hidden dangers:

Biggest Hidden Car Loan Danger: The Inherent Money Pit

Unlike home mortgages, student loans or other big-ticket loans, car loans are inherently money pits. A house can build equity; higher education can increase earning potential; even jewelry can at times be re-sold for as much as was paid for it. If you borrow to buy one of those things, you might eventually get a return on investment. But every single car loses significant value and keeps losing it as time goes by.

Solution: spend as little on your car as you possibly can.

Needless to say, in order to spend as little as possible over the life of the vehicle, you need to get a well-made, fuel-efficient car, instead of the one with the lowest price on the windshield.

But a pickup truck, SUV, sports car, or “luxury” model is a guaranteed money-loser. Don’t be concerned about what other people will think. Think it over: when was the last time you saw an expensive automobile and thought, “I really like and respect whoever owns that!”

The best buy? Numerous economists really suggest purchasing a used car that is a year or two old. That way you are able to actually take advantage of the fact that cars only drop in value. Even a car that is just six months old might offer you a substantial savings. Simply have it inspected completely so that you don’t lose what you have saved on maintenance payments.

Hidden Car Loans Danger: Dangerously High Monthly Payments

Regrettably, many people never figure out the total cost before signing on the dotted line. They end up staying up late at night attempting to figure out how to make ends meet. They live in smaller houses. They skip going out at night. They don’t go on vacation.

All that sacrifice to have a brand-new SUV in the driveway!

Take a close look at your finances, and determine how much you can pay total each month for the car. Make sure to take into account insurance, tax, maintenance, and fuel. Usually, when people actually do calculate the total monthly cost of the car they’re thinking about buying, they are astonished by how high it is.

How much Car Debt Are you able to Afford?

1) Make a list of your average monthly non-car expenses, and subtract them from your earnings.

your monthly after-income-tax income

any other taxes

housing (including any fees and property taxes, and utilities)

food

health insurance or HMO

life insurance

debt payments

401 (k), IRA, or other long-term savings

short-term savings

phone, cellular phone, cable, internet, etc.

entertainment and fun stuff (be honest!)

cost of yearly vacation(s) divided by 12

other expenses

what you can spend on a car

2) Subtract your monthly car-related expenses from the amount you’ve left over from your other expenses.

What you are able to spend on a car (from above)

Amount you’re spending per month on gas (increase or decrease this figure based on whether you are getting a car with higher or lower gas mileage). Monthly maintenance (remember: your new car won’t stay new long, so maintenance will be a problem).

Monthly insurance (remember that for a new car, your insurance premiums might go up).

Tax.

Maximum monthly loan payment.

Now plug the number above into a vehicle loan rate calculator to figure out big of a car loan, and how much interest you are able to afford.

Final Hidden Auto Loan Danger: Unnecessarily High Rates

If you simply take the first loan the dealer offers you, you’re most likely paying too much. Perform some comparison shopping on the web, and bring a list of the best loans with you when you negotiate loan terms with the dealer.

Do not allow the dealer cheat you by shifting the cost from the car loan to the car price to the deal on your trade-in. Make certain you get a good deal overall.

Congratulations! You now are much better prepared to stay out of an auto loan money pit than the vast majority of car buyers.

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For more information on Auto loans, don’t read just rehashed articles online to avoid getting ripped off. Go here: Auto loan

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