Don’t fall into the car finance trap, read on for our top nine tips for finding the best car finance deals.
Buying a car is often a big decision. There are different makes, models, and years to compare. Before you even sit in the driver's seat you might be also considering different options available with your selected model, like different types of upholstery, heated seats and steering wheels, satellite navigation, and cruise control. There's the all-important colour of the car too.
These bells and whistles may be exciting to spend time researching, but the fancier the car, the more it is going to cost. You will need to think about how to pay for the car too.
Our research found that less than a third of bargain hunters looking for a cheap car think about car finance before they head to the dealer's forecourt. You might spend time researching the exact make and model of a car that is best for you, but it can be just as important to understand the best way to pay for it as well.
Failing to find a cheap car loan, or research the best car finance deals can drive up the price you ultimately pay.
Here are some ways to ensure you get the best car finance deals.
Best buy unsecured personal loan rates are only available to people with a good credit history, so not all car buyers will be able to get them. However, it’s still worth shopping around as there are still quite a few good deals. You can check your credit report for free before you apply.
Some car dealers offer 0% finance on new cars, these deals are definitely worth considering if you can get one - you may have to pay a hefty deposit though. You will also need to understand exactly how much you will need to repay and when. It is critical you are able to meet all of these future repayments before you sign anything. If you miss a repayment that 0% offer may evaporate and you could end up paying far more for that car than you initially budgeted for. Missing a payment can also have a negative impact on your future credit score.
When looking at car dealership finance, make sure you take into account the size of the deposit and the final payment as well as the monthly payments as this can really ramp up the overall cost. It's not a good idea to sign-up for something you may not be able to ultimately afford, no matter how fancy the car looks.
Do your homework on market rates for car finance before walking into a car dealership so you have a good idea of what is a reasonable rate the salesperson might offer you. Don't forget to add in the costs of any application fees or periodic account keeping fees, if applicable.
Leasing deals can sometimes work out cheaper as consumers may not have to pay for servicing and repairs.
For consumers with a poor credit score, leasing could be next best available option as they are not actually buying the vehicle.
Standard car finance will usually be secured - this means the car could be taken from you if you fail to repay the loan. Alternatively you may be eligible for a personal loan to pay for the car - these loans are unsecured so you would own the car outright. You will still be personally accountable for the amount owing on the personal loan.
It is also worth looking at cars that have been pre-registered by a dealer. They only have a few miles on the clock so in effect you get a nearly brand-new vehicle at a second-hand price.
The longer the term of your loan, the more time you will have to repay it. This means the periodic repayments may be lower over a longer-term loan, however you may end up paying more interest over the life of the loan because you will take longer to pay off the principal of the loan.
Some finance providers may allow you to repay your loan early without penalty, which could save you significant amounts of interest.
Make sure you have any documentation in order so you can get your finance in place when you are ready - this is likely to include a driver's licence, proof of address (if this is different from the address on your licence) and you may need of income. This could be pay slips, bank statements. or your employment contract. If you're unsure if you have sufficient documentation, it's a good idea to bring as much documentation as possible, to avoid any delays.
Be aware of the maintenance costs of your new vehicle - the rarer the car and manufacturer, the more expensive the maintenance could be for that spare part you need.
The collapse of a motor manufacturer can have a knock-on effect on a car's resale value plus the availability of vehicle parts - these factors should be carefully considered by potential buyers.
As well as haggling on the price, look for free extras such as extended warranties and service packages. The salesperson may be very keen for your business, especially towards the end of their sales month period, and can offer you more than when you first walked in the door.
Don't be afraid to shop around - that friendly salesperson with the free coffee and snacks that is encouraging you to sign on the dotted line today will wait! If you don't like making big decisions on the spot, walk away, sleep on it, and make a decision in a calm environment the next day. Don't feel pressured just because someone else wants to make a sale.
Having the money ready before you start car hunting will strengthen your bargaining power as you can make the purchase immediately – you are effectively a cash buyer and you will not need to worry about credit history or finance approval decisions.
Don't forget your car insurance - check out our 10 common car insurance myths busted.