These days when you step into a car showroom, there will be two
major things that the dealer will be offering you. First he will
be offering you cars, and secondly he will be offering you
finance packages. This is how you should look at it. The fact of
the matter is you may probably wouldn't buy a car from your
bank, even if they started offering them, so you may wish to
apply the same scrutiny to the finance packages available at the
car dealership and choose to buy only you car there and the
finance package elsewhere.
It may be that there is nothing wrong with the finance being
offered at the car dealership and in many cases this will be
true. However, you must be aware that just because you buy your
car there, does not in any way imply that you have to use the
finance options and terms that they are offering. You are always
free to take a loan from somewhere else, such as a bank, and pay
for the car outright, and then simply make the loan repayments
to the bank as with any other loan.
You should be careful to find out exactly how much you are being
charged for car finance. The primary way to calculate the charge
of any credit is by using the APR or annual percentage rate.
This calculates the cost of the loan using a standardised
formula and all lenders must use the same method of calculation.
However, just because a car dealer's APR looks attractive does
not mean your search is over. You should also, always find out
how much the car would cost if you paid in cash. Remember that
providing a cash discount is exactly the same as charging extra
for credit. If the cash price is lower, then you may be better
off getting the loan from elsewhere and paying for the car with
cash, this will take advantage of the better price and you will
have a smaller amount to pay back to your lender.
The other thing you should look out for is down payments and
closing payments. These are payments that are paid at the
beginning or end of the term of the loan, and while the monthly
payment terms may be attractive, it could well be the case that
there are large additional payments to make and you should not
forget to calculate these in when pricing the finance.
Car finance can be almost as important as the deal you get on
the car itself and you should always regard getting a good deal
on the financing as part of the process of getting a new car.