Choosing the right car can be tricky. Many people spend weeks or even months comparing all the different models on offer to see which has the best fuel economy, the most boot space or even the highest safety rating. When it comes to car finance, however, people are far less fussy and will often take the first option offered to them.
This may end up costing far more than you actually need to pay. If you compare loans at MoneySupermarket you will find that there are many providers who will be able to offer you a far better deal on the cost of purchasing a car.
How to Choose the Best Car Finance Option
When it comes to choosing the best car finance option, you really need to shop around as much as you do for the car. However, very few people do. It is estimated that over 80% of used cars are purchased on HP through the dealer. This can cost buyers up to £1000 more than it would have done if they had arranged finance through an alternative source.
There are a number of other options available to buyers when they are looking for finance to buy a car. For many, a loan will offer a far lower rate of interest then a standard hire-purchase agreement arranged through a dealer. But don’t assume that your bank will provide the best deal either. Shop around and see what is available before you make a costly mistake.
Other Things to Consider
There are many things to bear in mind when considering car finance options. It’s not just the cost of the car, or even the interest rates, that you need to think about when making a decision about which option is going to be most suitable for you.
Some dealers will offer you a higher spec on your vehicle or even a lower price if you take out your car finance through them. Don’t be conned into thinking you get a better deal this way. Instead, negotiate the price of your vehicle without regard to any incentives that they may offer.
Remember that the interest on your finance arrangement will be dependent on your current credit rating. Check in advance how much interest you will be paying and get a final figure before you sign the paperwork. Another thing to think about is how long the repayment period will be. While it might seem better to pay a smaller monthly amount over a longer period of time, this is actually a false economy.
The longer you take to pay off your loan, the more interest you will end up paying, so it’s always best to clear your debts in the shortest time possible. You also need to consider how long it will be before you replace your vehicle. If you only plan on keeping it for three years, you don’t want to take out a five-year loan as you will still be paying for your vehicle long after it’s gone to its new owners.
It might be advantageous to borrow more than you think you need. Interest rates are often lower on larger loan amounts, so by borrowing a bit more you can actually get a better model of car for the same total amount of money.
