Car Finance: What You Need to Know
Most people interested in owning a car may never be in the position to consider purchasing a vehicle with cash and will consequently have to look at various other financing options.
While financing possibilities really do help many people buy their cars, you can also be caught out with bad financing deals. With this in mind, it’s important you go into a dealership understanding how car financing works, how to navigate the negotiation process and what tricks should set alarm bells ringing.
Here we take a look at the things that are helpful to know before you sign up to a car financing scheme.
There are numerous different sources of financing and which you opt for will largely depend on your personal financial circumstances and preferences. Amongst the many possibilities, dealerships, banks, credit unions and home equity loans are often the most popular options and suit a variety of needs.
While dealerships offer a quick and convenient service, they are rarely competitive and are usually the means by which dealerships make most of their profit. The high-pressure environment means you could end up paying way over the odds as the salesperson reels out extra products and add-on services that they claim to be essential.
Banks and credit unions offer a much more competitive service, will be able to give advice and tailor the product to your needs. They also give you a little time to think things over; check your online banking if necessary and ensure you are in a good position to move forward responsibly.
Finally, home equity loans are a risky way to finance a car as it is being purchased against the value of your home. If something goes wrong financially, there could be enormous repercussions. However, there are some benefits, like being able to deduct a little of the interest from your taxes.
The main things to watch out for when negotiating a finance deal are the basics. Just because you have established and agreed a price for the vehicle doesn’t mean you’re finished yet. Don’t sign anything until you are sure that all the figures are correct and remember that the interest rate and other additional costs should all be negotiable.
Finance deals are where most dealerships make their money and the finance salesperson will usually be working on commission, so negotiate hard. If you have the time, we would recommend visiting your bank for car finance deals, as they may offer a competitive and less risky service.