Under the bright lights of a showroom, it’s easy to focus on the car of your dreams and be lured into an excessively expensive finance arrangement.
If you accept a dealer’s loan, you are likely to find negotiating down the price of your vehicle difficult. On the other hand, if you have your loan already organised, you’ll see that money talks when it’s time to negotiate a discount.
Nevertheless, many buyers take the dealer’s finance option for convenience, unaware there might be high fees attached. Sometimes, these fees are used to subsidise the low interest rate being offered.
However, with a little bit of research—or speaking to your broker—you’ll likely be able to find a better deal in terms of interest and structure. Many will offer flexible terms from six months to five years and approve your application in 24 hours.
So, if you’re thinking of buying a car, here are some great tips to make sure you achieve fair terms for your finance.
Car Finance Tips
1. Be organised. Walk into a showroom with the money (or loan) in your pocket. You’ll get a totally different response from the salesperson, who may seek to win your business with a good deal.
2. Not-so-special. Watch out for deals that offer free service for five years or 100,000km. The car’s warranty will only be available while it’s serviced by the dealer. So, rather than tie yourself into that costly arrangement, use your pre-approved loan to negotiate a discount instead.
3. Avoid variable rates. A fixed rate is usually the smart move for a car loan. Your repayments will be predictable, which is helpful if you wish to apply for a mortgage or seek a larger home loan in the short to medium term.
4. Accelerate payments. Many car loans lock you in for a set period, so you can’t save on interest costs by fast-tracking your payments. If this is important to you, discuss it with your broker to find a more flexible arrangement.
5. Bypass fees. You must be careful to avoid a loan with built-in fees. Sometimes, these fees subsidise the low interest rate on offer. By using a finance broker, you’ll know what you’re paying for and be confident you’re getting a good deal.