Find out the True Cost of your car loan
A word of advice about buying a car on credit.
29 March 2010
Borrowing money to buy a car? Being smart about how you borrow can save you a lot of money over time and help you avoid financial difficulty.
To get the best deal on a car loan, find out the true cost of the finance. Compare the offer with different dealers and finance companies - then negotiate a better deal.
Find out the True Cost
Before you sign up to a car and finance deal, find out the True Cost of your purchase. Calculate the True Cost of the car by adding up the cash price of the car, the interest, insurance, and all the fees. That bargain second-hand car may end up costing the same as a brand new one once you add on all the interest.
Find out what you risk losing. If you miss payments you might lose the car and still owe the finance company money. Before signing the contract, find out what will be used as security for your loan. It might be just the car, but it could be your house. For a finance company to take security over your car, house, or other possessions, it must be specifically written in your contract.
As well as checking that you can afford the weekly payment, look at how long you’ll be paying the car off for. If the term of your loan is for a long period, you will be still paying off the same car when everyone else is driving something newer and flasher.
Compare deals from different dealers. Find out if the cash price of the car is reasonable for that make and model and for the condition that it’s in. You might find a better deal out there or you might be able to convince the dealer to lower the price.
Compare deals from different finance companies. Find out what deals other finance companies, credit unions and banks are offering. If you can pay less interest and less fees you will save on the total cost of the car. Also check what security different companies are asking for.
Negotiate a deal
Once you have compared cash prices and finance deals you will know what you can negotiate on. Many costs are open for negotiation so ask about the fees, lowering the interest rate and offer less security.
Don’t be afraid to walk away. A car is a big purchase, and paying off a loan is a big commitment, so take time to get more information and get the best deal for you and your family.