This Simple Step Could Save You From Getting Scammed While Car Shopping

Americans are having a tough time affording new vehicles, and it's not just because the average price has reached around $50,000 for the first time in history. The cost of owning a vehicle is also something to consider, which includes the monthly loan payment. 

There are a few tricks of the trade you'll run into at car dealerships that new buyers may not know about. The salesperson may tell you a monthly payment that sounds pretty enticing, but it may end up costing you more than you think. However, there's a formula you can use to find out if the financing terms are fair for you: total payment = monthly payment x number of months. 

Basically, multiply the monthly payment by the total number of months in the term you were offered. This way, you can see what you are paying in total, not just each month. A low payment each month can still add up, since you will be paying interest every single month. By the time you've paid off the car, it will have been a lot more money than the original sales price. If you take the full payment into consideration, you will see how much you'll truly end up paying — and calculate if that auto loan is an affordable total for you.

If you're new to buying a car, it may seem like the most convenient option is to figure out the finances at the dealership after picking out a car. However, most would advise against doing this. Instead, you should arrive at the dealership pre-approved for a loan. Dealerships will often mark up interest rates on car loans to earn a commission from partnered lenders — and these terms are often not negotiable. 

Instead, try financing your car through your bank, which offers more competitive interest rates. This means more savings in the long-run. You can apply online or in-person after you have selected a vehicle. You may need recent pay stubs, proof of income, or tax returns as well as personal identification documents. The bank will then run a credit check before approving a loan amount, interest rate, and re-payment terms. You can also try one of these auto lenders approved by JD Power. By coming to the dealership with a pre-approved loan, you have more negotiating power and are able to get a better idea of your monthly payments — and the full payment.