Car finance helps spread the cost of a new or used car. Instead of having to fork out for the full cost of the car in one go, customers have the option to get the car on finance and pay monthly. Many car showrooms offer a range of finance products to suit all your individual preferences and needs.
Car Finance
A no deposit car finance company will purchase the car on your behalf and you will pay the company back, plus extra interest payments. Sometimes there can be 0% interest deals, so it is worth thoroughly searching around the market before making a final decision. If you feel like getting a car loan is the right decision for you, then make sure you consider the points below before making a final decision.
How Much to Initially Put Down
Many people are lured into making ‘no money down’ deals as it means they can pay the whole amount in monthly instalments but is this the right decision for you and your situation? By saving up a significant amount and making a down payment you will save yourself money by decreasing the amount you have to pay each month and you will also save the amount you are paying interest on.
Also, since new cars decrease in value at a rapid rate as soon as you drive them away from the showroom, if you do not make a down payment, you will probably owe the finance company more than the car costs for some time. This means that if you have an accident, the insurance pay-out might not be enough to cover the loan.
Length of Agreement
Recently, auto loan terms have been increasing dramatically. This means that you will be able to pay lower monthly installments whilst also having more interest expense. You should be wary of long-term loans for used cars as they are very likely to have a shorter life of use – don’t let the loan to outlive the car as you will be left paying for repairs and repaying the loan or you will be paying the loan without a car to use!
Your Early Payment Fees
Before you put your signature on that page, make sure you know of any fee’s that may be given to you if your loan is repaid early. This could affect you in various ways, for example, if you wished to swap the car for a newer or better model, you might have to pay out the existing loan early. Situations such as this would add to the cost of the trade-in.
Captive & Independent Lenders
Captive lenders are financing businesses run by a dealer, while independent ones are outside businesses the dealer may work through to arrange financing for their customer. Know the dealer’s relationship with the lender because this lets you know whether the dealer can truly find you the best agreement, or if it is funnelling trade to an affiliate. Although, even independent lenders could have a financial deal with dealers who are likely to steer business in their direction.
Make sure that when you are shopping for a car, it is more exciting than shopping for a boring old loan! They are both big decisions that you are going to have to live with for a few years of your life, so make sure you are clued up and have researched as much as you can before choosing your car loan the way you would when choosing your car.