Rene June 30, 2019 No Comments

These days there are a variety of avenues available to prospective new car buyers to obtain finance. Even if your credit rating is not so flash, you still have as much accessibility to secure a car loan than you otherwise might have thought. So should you be offered the option for dealership finance, is it worth considering? Of course it pays to look into the merits of the idea, but this is what you need to know first.

You might be paying more than expected

It’s not uncommon to walk away from a dealership having been sweet-talked into purchasing other extras like extended warranty, metallic paint, fabric protection and car mats. In many instances, these are items that you probably didn’t anticipate on purchasing. What’s more, they could be factored into the total price of the transaction, so finance costs are going to be greater.

Another thing to consider is your negotiating power, which ironically, often diminishes when seeking dealer finance. You may have less room to work the price of the vehicle down, since dealers will argue that the headline figure of the interest rate is lower than you might secure elsewhere. Thankfully, last year regulations were introduced that ensure a dealer can no longer charge a higher interest rate than that they secure from a lender.

Contingent criteria could restrict your decision making

As we mentioned earlier, dealer finance is often sold under the guise of lower interest rates. However, this will typically be restricted to a finite period, usually just three years. If you can work with that timeframe, then great, otherwise you may be left with a balloon payment that could strain your cash flow position, or require you to make other sacrifices along the way to save up the required cash.

To be eligible for low interest rate financing, your choice of vehicle will be restricted to certain makes and models, generally favouring new cars only. Of course, this also happens to align with cars that depreciate quickly over the tenure of the finance, so you will be accumulating debt for a rapidly depreciating asset. Finally, dealership finance is restricted to those with good credit, so in the case of buyers with a poor credit rating, they will still need to arrange their car loan elsewhere.

 

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.