Americans are paying more than ever before for new trucks. Recently, analysts from Kelley Blue Book determined that new full-sized trucks released by GM and Ram in 2018 pushed full-size truck prices up beyond $50,0000. New heavy-duty trucks from the same automakers are projected to push truck prices even higher. So with that much of an investment on the line, what’s the biggest mistake you can make when it comes to buying a truck?
Not doing any research before buying a truck
In May, Harris Poll conducted a survey on behalf of Lending Club. Their questionnaire was for people who’d bought, financed, or leased a vehicle in the last year and those who intended to do such in the coming year. The results were a little surprising.
The results showed that almost half of those who took the survey were more likely to research good shows on television to watch than they were to look into auto loan financing options.
The lack of information about their auto loans was widespread. 40% of those surveyed were unaware of what competitive auto loan annual percentage rate (APR) they should expect. Even more shocking was that a third of those who took the survey didn’t know what their auto loan APR was.
Car and Driver reported that these days consumers are paying more for auto loans than ever before. Loan periods are averaging over 60 months. A failure to research before buying may be costing consumers way more money than they realize.
Buying a truck you can’t afford
According to the Wall Street Journal, long-term leases and loans are giving consumers the illusion that the vehicle they’re going into debt for is within their budget. Sometimes that’s not true.
Many didn’t feel it necessary to spend time researching auto loans before signing on the dotted line since people think loan length and APR aren’t negotiable. This is simply isn’t true.
But are these same folks missing opportunities to save money? Without doing proper research on auto loans, people may be overpaying for loans or even buying vehicles that they really can’t afford.
While doing researching auto loans and APR rates doesn’t sound like anyone’s idea of a good time, doing so can save consumers money. It can also help them avoid making vehicle purchases that will wreck their budgets.
Approximately one-third of auto loans for new vehicles had terms longer than six years according to Experian. That’s a 10% increase from loans just 10 years ago. With average loan lengths at 69 months, many consumers are lulled into a false sense of security.
A growing number of American consumers, about 33% in the first three quarters of 2019, are trading in vehicles they still owe money on. Trading in vehicles with negative equity is up an eye-catching 19% from 10 years ago.
What you need to know about auto loans
An auto loan is something you’ll have to pay for years to come, it’s a good idea to know exactly what you’re getting into.
It might be tempting to just go with a financing option offered by the dealership. While that seems convenient, the result might be paying a much higher interest rate than you would have paid by getting a loan directly from a lender. The dealer may add additional fees on top of the offered interest rate for your loan.
You can also get auto loans from online lenders, banks, and credit unions. Keep in mind the terms may differ from one lender to the next and may require money upfront. They may offer longer or shorter loan terms.
But shopping around for the best loan terms you can find can lead to substantial savings. Even one or two percentage points in the interest rate can make all the difference. According to Credit Karma, a $20,000 loan over a five-year period with a 4% APR cost $1,100 less than one with a 6% APR.
Avoid the biggest mistake when shopping for a new truck. Do your homework on auto loan financing and save money.