Things to Watch Out For When Buying a Car On Finance
Unless you’re one of life’s super savers it’s unlikely you can afford to buy a new car outright, you’ll probably need to take out some kind of car finance. There are two main ways people finance the purchase of a new car, they either take out a bank loan or they arrange a finance deal with the company from which they purchase the car.
The bank loan option is a relatively simple way to buy a new car. With a bank loan you can quite easily compare the best loan rates available on the market, check the APR and then buy the car outright with cash. When it comes to buying a car on finance though, things can get a little more complicated. Here are a few things you should look out for when buying a car on finance.
Don’t Trust the Salesman
The salesmen on car forecourts are notoriously good at what they do. First they’ll try to gain your trust and become your friend. They’ll have a laugh with you, show genuine concern for your needs and often tell you they don’t like the way other salesman operate and that they’re different, believe me they’re not! They, like every other car salesman on the planet have only one goal, to sell you a car.
The Price You Pay Matters
When buying a car on finance many car salesmen will try and convince you that the overall price you pay for the car doesn’t matter. They will argue that the most important thing is how much you pay to finance the car on a monthly basis, this is completely untrue. Yes, when you consider the amount you’ll be paying out each month for car insurance, fuel and maintenance costs then you will of course want that monthly finance payment to be as low as possible. When buying a car on finance though, try and remember that you will have to pay back every pound that you spend on the purchase price of the car in one way or another before the finance deal ends, so the overall price you pay for the car still matters a lot.
Ask To See The APR
Many salesmen will also try to tell you that they are giving you an extremely low rate of interest on your car finance deal. The interest rate they will often quote though is not the real interest rate. When buying a car on finance the base interest rate charged is not the rate you should be looking at, the rate you should be asking to see is the APR. The APR is the true interest rate you are paying to finance the vehicle after all fees and charges have been taken into account. The APR will often differ hugely to the interest rate you’ve been quoted by the salesman.
Watch Out For Bubble Payments
We mentioned earlier that the overall price you pay for the car matters just as much as your monthly finance payment. One big reason for this is that car salesmen often try to manipulate/lower your monthly payment by adding a large ‘Bubble Payment’ at the end of the finance deal.
This bubble payment could mean that you have to pay thousands of pounds on your final payment in order to keep your car. The salesman may argue that this bubble payment doesn’t matter because you can just hand the car back at the end of the finance agreement to avoid the bubble payment. Although it may sound simple, handing your car back to a finance company is not as simple as it’s made out to be so watch out for those bubble payments. If you’re happy to have a bubble payment on your finance agreement then that’s fine, just so long as you know that it’s there.