By Vivienne Ollis
If you are thinking of buying a new car you may be surprised to know that over half of customers today are opting to pay for their car through auto finance options, as opposed to a straight forward cash purchase. This is partly due to the range of finances now available, good news for customers? Yes, as this has created various payment options that will suit many differing financial needs. However, this variety can also leave you slightly confused about the benefits and drawbacks of each option, or which package best suits your own circumstances, and of course there is also the hidden terminology and jargon to contend with.
Therefore if you want to avoid the pitfalls of not understanding the credit options on offer to you, it is essential to research as much as possible first, a few simple searches on the web will quickly help you decipher the jargon and get one step ahead of the salesman should he start to brush over the fine print.
1 – Don’t just presume that finance is just finance- ensure you are fully aware of what you are signing for, there are several different terms out there, which can vary but most are classed along the lines of the following 2 examples:
‘Personal Contract Purchase’
This usually consists of a deposit up front, with a set amount of monthly payments (usually lower than other finance options), with the option to purchase the vehicle after a lump sum settlement at the end of the term, or trade in and begin a new agreement.
‘ Personal Car Leasing Agreement’
This usually works around a fixed term with set monthly payments, which can also include maintenance costs for the car. You may however be tied into set mileage limits and face huge penalties if you decide to return the car early. Be aware that with this option you have no opportunity to own the vehicle.
2- Ensure you are aware of the APR (Annual Percentage Rate: the interest charged on the loan) linked to the auto finance deal.
Ask for a calculation so you know how much you will be paying overall, if your dealer seems unable to provide you with this then seek outside advice before you sign for anything, you may find a better deal elsewhere.
3 -There are of course other items, which can remain hidden in the small print, and the list can be quite extensive. If a number of these are added to your purchase you could potentially end up paying thousands of pounds extra for your car over the course of your agreement. Read the small print and look out for any of the following, asking your dealer to remove the ones you don’t need or are just not interested in.
4- Beware of any auto finance insurance which may be added to your loan. There is a high chance you will be offered this to protect your payments from loss of earnings through unemployment or sickness. This will be sold to you as an optional extra but may not be explained properly, or even added in without your knowledge. Although these extra insurances can be beneficial it can also work out costly in the long run, just be sure you will really benefit from this before you sign.
5- Add ons and accessories – there may be a section in your agreement where the dealer can select accessories which you can have added on to your car purchase. Look out for this and either cross them out or again ask for these to be removed. If you have commented that the low profile tires or upgraded air con are great, be clear whether you are actually requesting these for your car, or just passing comment!
Finally, remember that buying a car is a major purchase so shopping around and haggling is acceptable and quite often expected. Be sure to let dealers know what other offers you have seen and ask them to throw in extra servicing or warranty etc. if you think they can give you a better deal.
Author Bio: Vivienne Ollis – Journalist & Blogger for www.peregrinefinance.co.uk