You might think that you have done the hard part when you have decided what type of car you are getting. You have selected the model, chosen the colour and then selected the add-ons you want. Nothing else needs to be done. OK – you need to pay for it but that is going to be easy right? In fairness it does not have to be the most difficult thing you do. There are places that will make you wish you had not started the process, but wade through the bank speak and technical talk and you will see the various types of car loans for what they are.
It may seem obvious to say this but you are going to pay more for the car by taking out a loan than if you saved up and paid cash. This should be taken into account before you step inside a dealership as by then your mindset maybe to buy now and worry about repaying later.
Who Should You Go To For Your Loan?
The dealership will be able to offer you a loan but it is best to look around first and not just take the first offer you have put in front of you. Banks may have a great offer and even when looking online there could be a lender who will offer a lower interest rate. Once you have chosen the lender you want to use, you need to make sure that your application will be accepted. To do this you will need to be pre-qualified and this will allow the lender to make their decision.
This will be worth knowing as you can use it in negotiations and may even enable you to get a lower offer from the dealership.
Details of the Loan
It is not just the repayment rate you need to decide on but the length of the loan. In some cases the rate will alter depending on the length of time you expect to be paying. Obviously the quicker you pay back the better, as this will keep interest repayment down, but you don’t want to leave yourself broke while paying of the loan. The lower you can get the interest rate the better, but often the dealership will have a basic set rate for all customers although there can be some leeway given if you have a good credit rating.
When you put down a deposit on the car this can help you pay back less interest. The higher your down payment the less you will borrow and the less interest has to be added and again this can help you get a preferential rate. It is likely that you have to make a down payment, and as mentioned it can help with the APR. Often it could be around 20% but this will vary.
A Final Tip
Whatever you do, so not go for finance before having discussed the car and made a deal on the price. Knowing you are good for a high value loan could mean that you don’t get the best deal on the car. Even if you have an offer from one lender there may be a better rate on offer at the dealers so keep your options open.