It is true that car financing has made it very easy for people to buy a car as most people do not have the money to pay for a car upfront. That said, buying a car is the second biggest expense for most people after buying a house, it is imperative to spend wisely and avoid any mistakes that could cost them much more.

Here are some common car financing mistakes to be wary of:

• Opting for long-term loans
  If you’re looking to get a car financed, you will most likely get certain options for the tenure of the loan repayment period. While the monthly installment amount will certainly be lower on long-term loans, but it is not advisable to opt for long repayment periods. The value of a vehicle starts depreciating the minute you drive it out of the showroom. You would not like the car loan to be paid off when its value has reached too low, so it is better to take the loan for a short period of time if your finances permit.
• Not having more than one finance option
  You should always have multiple finance options available. The on-road price or the amount apart from the ex-showroom price of the vehicle has to be paid upfront. This includes the registration fee, insurance fee, and the down payment amount. For the rest, you should make alternate arrangements instead of relying on only the bank suggested by the car company. You can reach out to your regular bank and get a car loan pre-approved. Relying on a single financial source is one of the most common car financing mistakes.
• Not understanding your budget
  Reaching out a little farther than the budget allows is common among many car buyers. While stretching a little is okay, you should not go out all and depend only on the source of finance that is being offered. You should always look out for emergencies that might demand money like a health crisis or other major life events. In addition, the regular income can be disrupted at times, which can also adversely affect your ability to pay your EMIs.
• Paying very high interest rates
  Do not pay high interest rates; it’s among the most common car financing mistakes you must avoid. If you’re approaching a bank to finance the car, you must ensure that you get the best interest rate available at the time. You should do that even if it means decreasing the loan repayment period or spending a little more upfront. Sometimes, when you’re going to non-bank lenders, you might even end up paying as high as 20% interest. Understand the total interest amount being charged and how much the car is actually costing you if you also add the interest amount before making a decision.