Think back to the last time you bought a car. You probably had an idea of the features you wanted, the general amount you could afford to spend, and you may have even known exactly which vehicle you wanted. If you’re like half of Americans, you’re also utilizing an auto loan to buy that car, rather than paying in cash.

You’d think that with 44% of the country financing their car purchases, we would be well-versed in optimizing those loans. The truth is, though, that the average car buyer overpays by a lot, losing out on thousands of dollars over the life of their vehicle’s repayment.

So, how can you finance your next car purchase without wasting money? Here are six mistakes that consumers typically make, causing them to overpay for their auto loans, and how you can avoid doing the same the next time you walk onto the lot.

1. Only Focusing on Monthly Payments

You are probably already aware of how much you can afford to spend on your auto loan each month. Whether you’ve meticulously crunched the budget or are simply going off of your current car payment, you aren’t likely to be going into the dealership without a number in mind. Putting all of your focus on this number might not be the best idea, though, and can result in you spending more on your loan.

Some car salesmen will ask you how much you want to spend on your monthly car payment. While they will then make you a deal that matches that monthly payment, it might not be the best deal possible.

There could be hidden costs or unwanted add-ons in that total loan, which you might not notice. If you walk into the dealership with a monthly payment as your focus rather than a total loan amount, you may be less likely to pick through each line item with a fine-toothed comb.

When doing your pre-shopping research, determine both how much you want to spend in total and how much you can afford to pay monthly. Then, make sure you’re able to negotiate both when you’re at the dealership.

2. Assuming that Dealership Funding is Your Only Option

Dealerships offer in-house financing, which makes it easy to buy your car and set up your loan all at the same time. But if you’re similar to 60% of Americans, you might not know that dealership funding isn’t your only–or even your best–option for buying a car.

Studies have found that consumers waste as much as $3,000 on their auto loans. Combine that with the dealers’ interest rates, which might not be the lowest you’ll find, and you’re on track to spend a lot more than necessary over the life of your loan.

In fact, a recent study from Outside Financial, an auto loan matching company, found that car buyers spend an average of $1,717 extra when they take out an auto loan through the dealer directly. That’s quite a bit of money to spend on hidden markups. Shopping around for other lending options is important; you have a lot of cash at stake.

3. Giving a Low Down Payment

When financing a vehicle purchase, you often have a choice as to how much you want to put down. This down payment not only secures the loan, but builds immediate equity in your purchase.

Since a down payment reduces the amount you need to finance, it also reduces the total price you’ll pay for the vehicle. That’s because you won’t have to pay interest charges on that part of your purchase, since it isn’t financed. This can save you hundreds over the course of your repayment.

Putting a decent down payment on your next vehicle purchase can also help you in the future, whether you want to refinance or are unlucky enough to total your vehicle. Cars depreciate quickly, which means that you could easily wind up upside down, or owe more on the car than it’s actually worth.

Being upside down will make it impossible to refinance down the line. This means that you won’t be able to take advantage of a reduced interest rate or lower your monthly payments. If you happened to total your vehicle, insurance would likely pay you for the value of the car, minus depreciation. If you owe more than that on your loan, though (and don’t have GAP insurance), you’ll be forced to write a check to your lender for the difference.

Your best bet is to choose a healthy down payment. This will save you money in interest charges and save you headaches down the line.

Related: Can You Put a Down Payment on a Credit Card?

4. Choosing Long Loan Terms

The longer you take to pay off your auto loan, the less you’ll pay each month. But while this can sound pretty appealing in the short term, it’s not the best choice financially.

Typically, a longer loan term will mean a higher interest rate. Lenders usually reserve their best rates for short loan repayments, so you’ll pay more for your new car in the long run–even if it’s more budget-friendly along the way.

A long loan term also means that you are more likely to wind up upside down on your loan at some point. The longest auto loans are typically 6-7 years in length–depending on the vehicle you drive, how much you paid, and how you drive it, this can easily be enough time to lose depreciation faster than you’re able to pay down the loan.

It’s better instead to choose a loan repayment that is as fast as you can afford, ideally no longer than 60 months. This might even mean buying a less expensive vehicle than you’d prefer.

5. Missing Hidden Fees

We already talked about the sneaky charges that often find their way into dealership auto loans, which cost consumers thousands of dollars extra on their vehicle purchases. But even if you walk into the dealership with your own secured funding, you can still wind up paying these unnecessary fees. It’s all about reading the fine print of your purchase contract.

These fees could include extended warranties that you didn’t request or desire. You might also get stuck paying for things like fabric/leather protection, vehicle delivery, and advertising fees. Some of these might be reasonable, but watch out for duplicates–and, of course, negotiation is always the name of the game in car buying.

Just remember that every extra penny you spend on your vehicle is even more once you factor in financing charges on your loan.

6. Not Refinancing When You Can

There are a number of reasons you will want to consider refinancing your loan down the line. Not taking the opportunity when it presents itself can even cost you hundreds, or thousands, of dollars.

If your credit score has improved since buying your vehicle, or if the economy has shifted and interest rates have dropped, you might want to look into refinancing. Even dropping your interest rate by a percentage point or two can make quite a difference across the life of your loan.

You can also look into refinancing if you want to reduce your monthly payment, or if you need to remove a co-signer from your original loan.

If you’re currently struggling with a high car payment, you might want to consider refinancing with LendingClub or Prosper. Want to know more? Read our Prosper vs. Lending Club Smackdown to find out which option would work best for you.

Bottom Line

Buying a vehicle is a pricey venture, no matter the specifics of your new car or the financing you choose. This just makes it even more important to save every penny you can on your auto loan.

Watching for unnecessary charges, shopping around for the right lender, getting the lowest interest rate you can (even if it’s a refi down the line), and handing over a healthy down payment can all work in your favor. When it comes to buying a new car, avoiding overpaying for your auto loan is even sweeter than that new car smell.

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  • Stephanie Colestock

    Stephanie Colestock is a respected financial writer based in Washington, DC. Her work can be found on sites such as Investopedia, Credit Karma, Quicken, The Balance, Motley Fool, and more, covering a range of topics such as family finances, planning for the future, optimizing credit, and getting out of debt.