Car finance is one of those necessary evils in today’s world. Most people do not have the cash to buy used cars outright, and so financing them helps them to get behind the wheel of their dream cars whilst allowing them to spread the cost of the car over a fixed period of time.
But there are many things that consumers do not know when it comes to buying cars on finance, regardless of whether they are buying a Fiat 500 or a used Landrover Freelander. Before you go out and organise the finance deal on your next car, be sure to bear the following facts about car finance in mind first!
Car dealers don’t offer the same finance offers
Let’s say that you wanted to buy a car from a franchised dealership. You might not be aware of this, but each dealership will often have different finance offers!
For example, one dealer might offer a 0% finance package if you put down a big deposit of 40% or more on the car you want to buy, yet a neighbouring dealership might only offer standard hire purchase packages.
Image credit: GillyBerlin
Before you go out and buy a car, it is worth checking out what finance offers each dealership has, because the extra mileage to a different dealership could well mean the difference between no savings and significant savings off the cost of your finance!
Pay as much as possible for your deposit
In order to entice customers to their dealerships, car salespeople will advertise some attractive finance offers that claim no money is required upfront so that your finance package can be organised.
Whilst, at first glance, this might seem like a mouthwatering deal to you, in reality you will be hit with high interest rates (especially if you’ve got a less-than perfect credit score). In a sense, you have to “play the game” in order to get a finance deal that is more favourable to you, and one of the rules of the game is to come up with as much cash upfront as possible.
Rather than part-exchanging your existing car for a new one, you should consider selling your car privately so that you end up earning more money for it than you would have done if you traded it in at the car dealership.
Consider alternative sources of funding
Car finance is generally easier to obtain than other sources of lending because you are effectively paying for a secured loan. There are many other sources that you can turn to if you are either having difficulty obtaining car finance or you simply don’t want a secured loan. The most-common options are as follows:
- Bank loans – if you have built up a good relationship with your bank, they are likely to offer you a loan at a good APR;
- Credit unions – sometimes your bank might be unwilling to help you when it comes to borrowing money. A credit union is a great alternative, because all lending is looked at by humans rather than automatically by computer systems;
- Credit cards – some people even buy their cars on credit cards that offer 0% interest over a year. Of course, this means that the credit card must be paid off within the 12 month otherwise hefty interest rates will have to be paid for!