Interest rates are still at some of the lowest they’ve ever been — making it super tempting to finally get a new ride. Plus, all these crazy car deals are being advertised… how could you not take advantage?
Whether you’re eyeing a shiny new vehicle or a pre-loved one, there are a few things you need to get in order before you sign on the dotted line: your credit score and your car insurance. If either of them aren’t taken care of properly, you could end up paying an extra $7,600 — or more.
If you can afford the car, why does your credit score matter?
Financing a new or used car isn’t any different from getting a mortgage or taking out a personal loan — at least not when it comes to the interest rate.
People with better credit scores get better interest rates, period. WalletHub found that someone with fair credit will likely spend five times more than someone with excellent credit on the same three-year, $20,000 car loan. That’s an average of $5,997— a quarter of the car itself!
Even if you can afford the car, don’t make the mistake of paying 25% more just because your credit score is meh. That number is something you can fix, and you can start by checking it on a free website called Credit Sesame.
Within two minutes, you’ll get access to your credit score, any debt-carrying accounts and a handful of personalized tips to improve your score. You’ll even be able to spot any errors holding you back (one in five reports have one).
It’s free and only takes about 90 seconds to sign up. Use it to start fixing your credit, and you could save almost $6,000 on your car loan.
A required bill for your new car doesn’t have to be an expensive one.
The other way you could be wasting serious cash is through your car insurance. It’s easy to just keep your old insurance company when you drive your new car off the lot — but it could mean hundreds of dollars down the drain each year.
When you’re ready to buy your new car, check a website like Insure.com to compare car insurance prices. All you have to do is enter your ZIP code and your age, and it’ll show you your options.
People have saved an average of $540 a year — that’s an extra $1,620 while you pay off your three-year car loan. All it takes is a few minus to look at your options.
So before you decide to buy a car, make sure you have your credit score in check and your car insurance options lined up. If not, you could be making a very pricey mistake.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.