In choosing a car finance package, you will want to secure a deal that is within your budget and yet still allows you to access the best possible vehicle. This process can be somewhat confusing because of the range of packages available and the number of competing finance providers.
If you are buying a new car you will almost invariably be bombarded with offers and associated finance deals by dealerships and manufacturers alike. So how can you get the best deal from a car finance company when the time is right?
A finance package for a new car essentially involves you taking out a loan to cover all or part of the cost of the vehicle, then repaying this over an agreed period. The impact of interest means that you will ultimately pay back more than the value of the original loan. The amount of interest you will have to pay will be dependent on your credit rating and the type of finance you choose.
In fact, your credit rating will determine whether or not you are eligible for new car financing in the first place. So it is a good idea to check this before you begin the bargaining process, as you will be able to work out whether or not you are likely to be approved and at what interest rate.
In selecting a car finance package, you need to work out which type of deal will work best for your circumstances. Some loans will cover the full cost of the vehicle, although in recent years the popularity of hire purchase (HP) and personal contract purchase (PCP) financing has increased.
With HP and PCP deals, you are essentially renting the car for a set period, after which you can either choose to buy the car outright with a lump sum payment, or return it to the dealer. There are variations on this arrangement and you will need to check the small print. The value, vehicle type and the size of any deposit will all affect interest rates and monthly payments.
When it comes to comparing car finance deals, it is essential to look at the APR (annual percentage rate), together with the schedule of repayments. This will help you to determine whether one offer is more affordable than another.
Avoid opting for a deal simply because it seems to offer small monthly payments, or even repayments which occur more frequently. Payments that are advertised on daily or weekly terms are usually presented in this manner to hide just how costly the package really is.
Agreements which are to be repaid over a shorter period may come with higher costs per month, but a deal paid back in three years will have a lower overall cost than one running over five years because of the impact of annual interest rates.
Negotiating finance deals face to face is uncomfortable for many people, so choosing an online car finance company to help buy your new vehicle may be a good alternative.