In recent months a lot of focus has been directed towards the finance industry, with particular attention falling on the role that flex commissions have had on the outcomes for new car buyers. The enquiries have highlighted the importance that finance applicants understand what they’re signing up for, and ultimately, how to keep your car finance in check. Before you sign a finance agreement, consider these matters which can quickly have an impact on the overall cost of your loan.
Use competition in the market to your advantage
With all sorts of deal structures available when it comes to financing, you should never stop doing your homework. Differences in base rates or ancillary costs can be enough to make a significant impact over the life of a loan. Furthermore, some lenders will offer flexibility that you can’t always put a price on. If in doubt, engage a car loan broker to do your work for you and help attain the best outcome. Ultimately however, in the finance industry where there is no shortage of players vying for your hard earned money, don’t make it an easy task for them.
Do you really need to purchase those add-on extras?
Dealerships have a long history of offering extras to new car buyers. Some of these extras might be modifications to the car – such as enhanced paint protection, an improved body kit, or a ‘sports’ package – while others might concern the purchase itself. For example, insurance or extended warranties.
If the item isn’t something that you originally set out to include as part of your purchase, reconsider its necessity and what actual benefits or coverage it provides. While it’s not to say the add-on extra won’t benefit you, the dealership and salesperson you’re negotiating with does stand to gain from its inclusion. So on that point, it’s also worth remembering that you don’t have to purchase everything through the one channel, and if you do, it will increase the total cost of your loan and repayments.
Starting negotiations from the wrong side of the equation
Naturally, all car buyers try to negotiate a better outcome at some point during the purchasing process. After all, who wants to pay more than they should? That said, many fall into the trap of negotiating an outcome that suits their ideal repayment levels. From a financial management perspective, it may seem prudent to know your means and limitations before taking out a loan. And this is certainly true – up to a point.
While you should keep this knowledge in hand, revealing it to the dealer can work against you, giving them more negotiating power. Instead, focus on the purchase price of the vehicle itself – taking out those unnecessary add-ons and extras. Drive down this purchase (retail) price to shape the resultant interest and repayment costs for your loan, since this is the underlying asset which is subject to finance.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.