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Researching Car-Loan Terms Could Save You Money

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Cash auto loan
Photo: Lukas

Americans are currently choosing the longest loan periods and paying the highest costs for auto loans than at any other point in history. While there could be multiple reasons behind these behaviors, one possible cause is that Americans are not researching car-loan terms.

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How lack of research can put a dent in your wallet

In May of 2019, Lending Club had Harris Poll conduct a survey for the company. In the survey, people who had leased, financed, or purchased a vehicle in the previous year or had the intention of performing these actions within the next 12 months responded to a questionnaire.

The survey found that almost half of the respondents had a higher chance of researching something to watch on Television than learn about an auto loan’s financing options.

Even those who had already purchased a vehicle did not know relevant information about their auto loans. 40 percent of buyers surveyed didn’t know what APR to expect for loans, while a third were unaware of what their own APR was. In addition, 37 percent of buyers in the survey thought APR and loan length were non-negotiable, so they didn’t think researching the rates was worth it.

While researching about auto loans can be time-consuming and slow, it’s ultimately an important step in the car buying process. Without doing your research, you could end up purchasing a car you can’t afford or paying more for your loan than you have to. In other words, you could miss out on an opportunity to save money.

During the first half of 2019, about a third of auto loans’ terms for new vehicles were more than six years long, with the average loan length being 69 months. Plus, 33 percent of Americans who traded in their old cars had negative equity.

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If you’re in the market for a new car, it could be in your best interest to do some research beforehand so you can choose the right vehicle and loan for you.

News Source: Car and Driver