According to a report, many people struggle to pay for car loans. Getting a car financed at a lower interest rate is not a cinch. Many people do not even have clarity about dealership financing and private auto loans.
You can apply for a car loan from a bank or a direct lender by paying down a portion of its value upfront. Dealership financing is different from a car loan. It includes hire purchases and personal contract purchases exclusively offered by car dealers, not by traditional financial institutions.
You should always get a general idea of what is on the table when you go to a lender or a car dealer. Some online platforms can help you compare the total cost of financing a car from a direct lender or a car dealer.
Once you have decided on a model you want to buy, you can simply go to a showroom and check for the prices. Are they the same as that you see on the internet?
Tips for getting an affordable deal for your car
Here are the tips you should follow to get your car at an affordable deal:
Cash is still king
Although you can have your car financed from a direct lender or a car dealer, cash is still considered a better option to save money. It should not bother you if you cannot pay the whole cost of your car from your pocket, but you should try to pay down a larger deposit.
The more money you pay upfront, the more affordable interest rate you will get. Generally, you are recommended to pay at least 10% of the sticker price, but you should make it at least 30 or 40%. If your credit report is not stellar, it is always advised to pay a larger down payment. With a larger deposit size, you can get car finance with instant decision.
Negotiate with the repayment length
You can negotiate the repayment term and the amount of the loan if your credit score is good. If your financial condition does not allow you to make a higher payment, you can choose for a longer repayment period. This will reduce the size of the monthly instalments.
However, shorter repayment lengths are always better than longer ones because you can avoid paying a lot of interest in total. Some lenders offer longer repayment periods to their borrowers to make profits in terms of interest. You can negotiate for a smaller repayment term, provided you can make monthly instalments on time.
Do not assume that dealers offer the best deals
Many people believe that dealers offer the best deals because you are borrowing a car from them. Well, it is a mere myth. Car dealers may charge you very high interest rates. A personal contract purchase usually costs a lot of money because it includes various fees. At the end of the term, you may have already paid off more than double the cost of the car, and yet you will have to pay off the balloon payment to own the car.
You should carefully compare their costs with those of other alternatives, such as private lenders and credit unions. You may be lucky to get a more affordable deal from them. You should do homework before stepping into the market.
Ask for the breakdown of the price
Car dealers will generally quote a bundle price, but experts suggest you ask for the breakdown of the total cost. It will give you an idea of what is added to the sticker price. You can trade in your current vehicle if it is in good condition. Ask your dealer for the separate trade-in value.
However, you should have an idea of how much your current car costs. Most of the time, dealers quote a fixed price regardless of a car’s condition. It might be a deal of loss. If your car is in good condition, you can get a good bargain.
Sell it out privately. You can use that money as a down payment on your car. Make sure you also ask about the costs of add-ons. Do not buy them if you do not need them. Dealers often encourage extended warranties in exchange for extra costs. You should not be tempted to buy them because that is just for the sake of profitability.
Always check the details
Car dealers may offer you plans that seem very affordable, such as zero percent financing. Before you sign up for the deal, you should carefully calculate the total cost. Avoid long-term repayment plans, as you will be paying more interest over time. While opting for a personal contract purchase, you should consider if it is actually worth using it, or you should consider other alternatives.
It may seem cheaper to you if you have to return the car to the dealer at the end of the contract, but despite that, you may save money and own the car if you use other alternatives. Do not buy what dealers advertise. You should rather do some research and comparison-shop.
Private lenders are a better option than car dealers if you want to own a car. You can qualify for a car loan at better interest rates despite a bad credit score. You are completely free to use your car without worrying about extra mileage.
Lenders can even help you fill the gap in your down payment. You can apply for 5K loans to arrange the down payment for your car.
Accompany someone
It is always a good idea to take someone with you who is knowledgeable about cars. Two heads are better than one. The person accompanying you can help you make the right choice when you are in two minds.
The final statement
You should do proper research before having your car financed. Do not pin your hopes on car dealers. It is likely that the deal you get from a direct lender is much cheaper. Ask your friends if they can help you make a better choice.
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