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The Most Common Car Financing Mistakes and How you Can Avoid Them Happening to You

Posted on: June 22, 2015 by renegade

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I know ‘financing’ is one if those words that can make people switch off. People feel its something too complicated to understand, don’t bother to do their research, and their wallet suffers as a result.

As it’s coming up to the end of the financial year, a time where many car dealerships showcase their best bargains. Many of you will be queuing up outside the car lots right now, getting ready to pounce on the first great deal you see.

Car Finance Mistakes

However, just because the price is cut, does not mean you aren’t getting caught out in other ways. Dealerships know that you’re there for the mad sales rush, and use the heavy competition for deals to their advantage.

But don’t worry – there’s still time. Take a deep breath, read out guide, and you’ll still have time to catch the sales. Only now you’ll be able to get an even better deal than the one laid out for you.

You have all the time in the world

Buying unprepared is one of the most frequent mistakes made by consumers. It’s not the end of the world if you miss this month’s sales. Taking your time to do your research, consider your budget and financing options, and chose the best car for your needs will put you in a much better position than any flash sale will.

And don’t worry, another will come along soon enough. For more information on the best times to buy a car, check out last week’s blog post.

Count your pennies

Before you start looking for your dream car, make sure you sit down and work out what you can afford. There’s nothing worse than finding your dream car and then realising it’s way out of your price range.

Don’t make the mistake of entering the dealership without knowing your budget and ending up paying out more than you can handle. If you know exactly how much you can afford it helps prevent dealerships from pushing you to cough up that little bit more & more – you know where your spending limit is and you can stick to it.

For help working out your finances, use our Car Financing Calculator. Just enter the information you have and it will tell you how much you should expect to pay monthly. You can use this figure to help get a more realistic view of what cars and financing options you will be able to afford each month.

Do your research

In the eternal struggle between company and consumer, knowledge is your greatest weapon. If you shop around for best prices on warranties, insurance and aftermarket products, you’ll be able to tell if your dealer is offering you a good (or bad) price.

Dealerships also rely on the fact that they are the experts. They can use the average consumer’s general ignorance to lead them to the deal that gets them the most commission. You wouldn’t trust a fox to advise you on which chicken coop to by, would you?

Armed with your research and informed decisions, you can empower yourself and avoid any unnecessary add-ons or extra costs you might be persuaded into signing up for.

Should I ever consider dealership financing? <h2>

Generally speaking, dealership financing offices offer auto loan rates several points higher than you could receive from a financing specialist like ourselves. Don’t believe me? Bring us any genuine quote and we will beat it.

These dealership interest rates can scale off your credit score as well, which could hurt you if you’ve had a few credit slip ups in the part. In this case, you’d probably be better off getting a ‘bad credit’ car loan.

But wait, the worst is to come…!

Organise your financing first

Did you know that in some cases you can actually save money in the long run by paying a higher interest rate?

I know this seems counter-intuitive, but that’s why people get caught out. Dealerships lure in customers by advertising low finance offers on a contract that must be accepted “as is”.

This all seems fair enough – you get a low rate and the dealer gets another sale, so everybody wins?

But what’s this in the small print…? You see, when you accept the low interest rates you are obliged to agree to all the small print too. Any attempt to negotiate the small print will often terminate your special interest rate.

This is because car manufacturers will subsidise low interest rates to the dealer in exchange for the buyer’s right to negotiate price reductions. These lower interest rates rob you of your bargaining power.

If you walk into the lot with your financing pre-approved, not only will you not be drawn in by seemingly low dealer interest rates, you won’t have to accept a contract that robs you of your bargaining power.

Even if you end up with a higher pre-approved finance rate than the dealership is offering, you can negotiate your way out of unwanted costs and extras, as well as the price of the car. This lower overall price can negate the effects of the higher interest rate – so make sure you crunch the numbers to see if this works for you.

Don’t be scared to negotiate

We aren’t used to bartering in today’s society. If you walked into a corner store and tried to get 20 cents off a can of beans they’ll no doubt tell you where to stick it. Buying a car is one of the few opportunities you have to influence the price of a product, so make the most of it!

Here are some of the areas where you could potential push the price down on your car.

– The purchase price of the car.
– The Price of aftermarket products and options such as stereos, sat navs etc. – You may be able to find businesses outside of your dealership that can give you these options for cheaper – knowing your options is a great bargaining tool.
– Insurance – again, you may be able to find this cheaper elsewhere.
– Registration – The cost of registration is fixed, but you may be able to persuade the dealership to absorb the costs
– Dealer delivery fee – These fees don’t just cover your car’s delivery, they can also include filing paperwork, basic detailing or setting up the car’s onboard computer. Not all of these costs will be necessary, so investigate and cut out what you don’t want or need.

Ask a specialist

If you are struggling with your research or can’t work out which deal is best for you, ask a specialist. Many people take it upon themselves to do all the work and don’t consider getting help, even when it could save them a lot of time and money.

On that note, if you need help with anything detailed in this blog post or any other issues around car financing, contact us and speak to one our our knowledgeable consultants who will be happy to help.

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