Purchasing a new vehicle can often be an exciting yet stressful period. After all, there’s little fun in hopping between showrooms around the city, negotiating with salesmen, conducting mechanical checks on the car and the like. And while the process to obtain a car loan can scare some, there are several initiatives you can adopt to ensure that you end up on the right side of the ledger.
As we’ve detailed previously, remain cautious when you are offered 0% car loans. In some, if not most instances, dealers will seek to recoup the costs elsewhere through a higher purchase price of the vehicle, or by selling you add-ons. Even among low-cost financing arrangements, one needs to be wary to ensure the rates don’t skyrocket half way through your payment plan. As such, forecast and budget the payments you will be making on the loan, and as always, identify whether there is benefit in paying off the loan early given your individual circumstances.
Unfortunately, once you drive your car out the showroom, it will immediately start to decline in value. This has become the reality of life, what with new vehicles released on a regular basis, overwhelming supply, mechanical wear and most of all, depreciation. Accordingly, only take out a loan for as much money as you really and truly need. You don’t want to be paying off a depreciating asset for the rest of your life.
While the debt might be cheaper than the likes of credit cards and some other forms of financing, reduce the value of the loan by contributing as much capital as you can up-front. If you can ‘partner up’ with a significant other, or even a family member, increase the initial capital to substantially reduce the value of the interest payments due.
Settle for Less
One of the traps that customers get caught out by, is where a salesman pushes them towards purchasing a car complete with extras, accessories and other services. Understandably, one might want these products, however, they are often significantly cheaper in the automotive after-market. Recent media reports have seen ASIC warn against the value offered through services such as extended warranties and insurance. All in all, know what you need at the time of purchase, and defer other non-essential expenses until such time you have better control of your finances.
There’s no shame in asking for a better deal. Regardless of who you deal with, always try to secure yourself a lower interest rate for the particular car that you want. Whether it be an exemplary credit history, or more stringent repayment terms, try to leverage whatever facet you can – provided it works for you. If you can’t find what you’re looking for, and your demands are reasonable, continue looking elsewhere.
If you have any questions on the above or any other matter, don’t hesitate to contact us.
The Fincar Team