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How to Avoid Auto Loan Delinquency

July 29, 2016

Watch out, fellow drivers! We're not faring so well in the auto loan department. Did you know that around a quarter of auto loan borrowers have trouble paying on time? For loan terms ranging 73 to 84 months, over 30% of borrowers were 60 or more days behind on their payments this year.1 It's time to avoid taking a loan for dollars we really don't need to borrow. That might mean making sacrifices. Although, there are some practical ways to borrow less and still drive the car you love.

Consider Used Vehicles

Sometimes used cars are very lightly used. You can even find them with their original warranty still in tact. Used vehicles, of course, are less expensive than new ones; but there's more to the story than that. Vehicles usually depreciate fastest just after they are purchased for the first time, brand new. Essentially, new car buyers are paying for the newness of the car. Once they drive the car off of the lot, it's not new anymore, even if it looks and smells new. Accordingly, it's value drops rapidly. Avoid paying for that "brand newness" by finding a lightly used car. The amount you'll need to borrow could be thousands less.


Drivers often neglect their negotiating power when buying or leasing a vehicle. If you go to the dealership not knowing the car's market price or dealer cost, you're doing yourself no favors. When purchasing, use the invoice price as a target purchase price. Alternatively, try going a little below the market price of the vehicle. The market price may be easier to obtain but it may also be a little high, depending on the way things are going in your area. Find out how low you might be able to go by researching the invoice price (dealer cost) of the vehicle.

The market price and the invoice price are useful when you lease, as well, since your lease rate is derived from the purchase price and the residual value of the vehicle. Do your best to negotiate the purchase price down as much as you can before you sign an agreement. Remember, you do not have to come to an agreement. You can walk out of the negotiations at one dealership and try your luck at another, or come back to the original one to try again.

Control Your Ego

Cars are symbols of status. We would all like to have glossy, expensive cars because we all have egos, however big or small. If we let our egos rule our lives; though, we will be in trouble. Try to find the least expensive car that matches your personality and makes you happy, not the most expensive car you can afford. The latter is what causes financial troubles. Be extra careful in your dealings with salespeople. While they are usually well-meaning, they have a tendency to hold the reins of our emotions. There's something profound about a fellow human being reassuring us that "Hey, you're right; this car is hot. I can see you driving down the street in this!" Never allow others to get inside your head when you're shopping. Listen to your conscience and avoid getting emotionally attached to anything that's out of your price range.

Know What You Can Afford

Before taking any test drives, take a look at your monthly bills and find out how much you would be comfortable paying for your auto loan. Try to leave some extra income in your bank for emergencies, of course. Then, find a car you like and calculate the loan payments with a calculator like this one. For lease payments, try this one. If you end up with something that fits your budget, get some quotes from local dealers.

Getting online quotes is faster and easier than getting quotes in person, at the dealership. Click here to get as many free quotes as you want, from any dealership.

  1. Mello, Tara. "Delinquencies Rise with Long Car Loan Terms." 17 July, 2016. Bankrate. (link)

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