Car Finance
Every March and September car showrooms across the country are flooded with inquiries from car buyers wishing to purchase vehicles with new registration plates. More than 1,000,000 cars regularly leave the showrooms of new car dealers in these two months, accounting for a large slice of new car sales every year. But its not only cars that new car dealers do a brisk trade in. Car finance loans too also fly off the shelf, as more and more buyers opt to spread the cost of their new car purchase over several months or years. But are new car buyers getting value for money when they opt for a car finance deal from a showroom?
Showroom car finance deals
Car finance deals arranged through a showroom are very convenient, especially if you are buying a new car on impulse or because the offer made to you on the car is just too good to turn down. It does however pay to be prepared, as often arranging a finance deal in advance through a high-street lender or over the Internet will save you money. This is because many finance deals arranged through showrooms have a high APR; the interest rate could even top 15% in some instances.
A pre-arranged finance deal however could cost you several hundred if not thousands of pounds less than a finance deal through a new car dealer. APR rates on finance deals available on the Internet are as low as 6.0% - certainly worth looking at before taking yourself off to test drive that new car!
Being vigilant on car finance deals
It is important however to be vigilant when arranging a finance deal for your new car. Low APR rates are all very well and good, but do they represent all of the charges that you will end up paying the loan company? Often, the lowest APR deals have other add-on charges, the most significant being the arrangement of payment insurance for your credit agreement. This is generally an optional extra to your finance deal, protecting you if you are unable to meet the monthly repayments. However, by opting for the insurance it is likely that the finance deal will cost you as much as, if not more than the finance package that you can arrange through your showroom.
As an example. On a £12,000 car loan spread out over 60 months, an APR rate of 6.1% will result in a total repayment of £13,898.40 plus any additional application and arrangement costs. If payment insurance is factored in the total loan to be repaid could top £18,000, which is a lot more than the £17,128.75 you would pay on a straight 15% APR finance deal.