How to arrange your car finance deal
Choosing the right car can often
take months of research, involving endless comparisons between different
manufacturers and their models.
Yet when it comes to sorting out a car finance deal to buy that vehicle,
would-be buyers often get it wrong.
Research shows that while motorists spend time and effort trawling local dealers
or the internet for the best price for a new or used vehicle, and will even haggle
over an extra half a tank of petrol, they sign up for the first car finance deal they are offered.
The result can be costly. One senior financial watchdog has estimated that more than 80%
of used vehicles are bought on hire
purchase (HP), arranged through a dealer. They often end up paying £1,000 or more
than the cheapest alternative source of car finance.
So how can you ensure you sort out the best new or used car finance?
Here are some simple tips:
Shop around. A loan is almost always a much better way of paying for that purchase. Don't assume your bank will offer you the best personal car finance - or that you can't get credit elsewhere.
You may be offered a lower price or higher spec if you sign up to HP through the dealer. Always negotiate the best price for your vehicle independently of any car finance arrangement.
Knowing in advance what interest you may be paying for the vehicle will help you budget better. Any deal will depend on your overall credit rating. Check first using our car finance comparison tool. Alternatively, use our Smart Search system that can
find the cheapest loan based on your credit score.
When applying for a loan, think carefully about the repayment period. The longer the loan period, the more interest you will be paying on the car you buy.
Some loan providers structure their deals so that lower interest
rates apply once the loan exceeds a certain level - £5,000 or £10,000
for example. After this point, the APR can drop quite substantially.
So it can be worth borrowing a little bit more to benefit from a lower rate.
How long will you have your car for? If you are only going to keep it for 3 years
don’t sign up to a 5 year finance agreement as you’ll still be
paying for the car after you’ve sold it”