Getting The Best Car Loan Deal

Although some people can get away with not owning a car, most people do need one otherwise they wouldn’t be able to go about their everyday life.

However cars are expensive, so in this and the next article we will look at what options you have when it comes to owning a car, and how to do so in a way that saves you the most money.

Financing Your Vehicle

Most car dealerships will offer you car financing, where they give you a loan to help pay towards the cost of a new car.

However be aware that these loans are usually at a slightly higher interest rate than what you would normally get from a bank, and because they are lending you the money, they might try to lend you more so buy a more expensive car.

If you need to finance your car, a better way to do so is with a loan from a bank or credit union.

You will get lower interest rates on the loan than you would at the car dealership, and avoid the risk of being persuaded to take out more than you originally intended.

However when it comes to car loans make sure you look around to find the best deals available, because even a few percent could make a significant difference to how much that loan is going to cost you overall.

Generally you will find that credit unions will offer you the lowest interest rates on your loan, so if you can get one through a credit union it might be your best option.

Getting A Car Loan

Here are some things you should take into consideration when getting a car loan.

Instalment Vs Interest Loans

If you are able to do so, go for an interest loan rather than an instalment loan, as this means you only have to pay interest on the remaining amount of your loan.

An instalment loan requires you to continue paying interest on the full amount of your loan. For example, even if you have paid £6000 of a £12,000 loan, you will still be paying interest on £12,000.

Of course, what option you choose to finance your vehicle will largely depend on your current financial situation. But if you are able to do so, it is better to go for the option that will save you money in the long term.

Money Down

The more money you can put down on a car the less of a loan you will need, which means less money will be spent on paying back that loan. In some instances you may also be able to get lower interest rates by putting more down.

This is definitely something worth considering because it could help to save you a significant amount of cash. So if you are thinking of purchasing a vehicle, but are able to wait awhile, do so and save up some money in the bank.

The longer you wait, and the more you save up before making your purchase, the better a position you will be in financially when it comes to purchasing an automobile.

In general, you will want to give yourself at least one or two years worth of savings time, depending on your level of income.

If you know that you will change your vehicle on a regular basis, then saving towards a new vehicle is something that you are probably better off doing continually by always setting aside a small portion of your income each month to put into your bank savings account.

Cash Rebates

Some cars come with a rebate, which is money you get back from the car manufacturer for buying the car.

This can help to save you a bit of extra money, although don’t make the mistake of buying a more expensive car just because it has a rebate.

There are two things to bear in mind when it comes to cash rebates. The first is that not all vehicle manufacturers will offer a cash rebate, and some will only offer them at certain times of the year on a promotional basis which can make it difficult to predict when you can benefit from such a scheme.

Secondly, different vehicle manufacturers are likely to offer different amounts of cash rebates. So it can be worth looking around to see who will give you the best value in exchange for your new purchase.

Short Term Loans

The shorter your loan the less it is going to cost you overall, so try and get the shortest loan possible.

However make sure you can afford to do so, as shorter loans mean higher monthly repayments. If you are not able to make your repayments, you may end up losing whatever it is you used to secure that financing agreement.

For most people, a short term loan tends to be quite risky. Yes, it can save you money, and if you are on a good income this is probably the best option for you.

But if you have any doubts about being able to repay the monthly amounts, you are probably better off going for a slightly longer term financing plan.

Pay It Off Early

If you can afford to do so, and your loan agreement allows you to, pay off your loan in full and you can save having to pay extra interest.

If you think this will be a possibility for you some time in the future when you take out a vehicle financing plan, then enquire about paying off the finance early before you actually commit to anything.

Not all financing plans will allow you to pay off the debt early, so do not take it for granted that your dealership or financier will provide you with this option.