The following is a guest post.
In the current economic climate, many of us don’t have the required funds to go out and purchase a brand new, shiny car outright. However, thanks to the wonders of credit, this doesn’t necessarily mean that we can’t have what we want right now. Car credit is one of the most common ways that people purchase cars these days as it requires very little upfront cost and means that you don’t need thousands of dollars lying around in your bank account to get your hands on a new automobile.
However, if you don’t know that much about car financing, you can end up getting into a bit of a mess financially. In the same way that credit cards often lead people into debt, car financing can do the same thing if you don’t take into account the rates that are being offered. There are a number of things that you can do to get the best car financing rate, and here are a few tips:
#1 – Check your credit rating before applying
As with any kind of credit, the APR (or interest rate) that you are going to be paying when it comes to car finance, which be partly based on your credit history. Your credit rating is basically an overview of how trustworthy you are, and how likely you are to make the necessary payments on time. If your credit rating is good, then the car financing company is going to trust you more and therefore, offer you a lower rate as there is less risk to them.
However, all car financing companies will use slightly different algorithms to decide whether your credit rating is good or bad. Some of them might even try and tell you that your credit rating isn’t too good to get a highly interest rate out of you. By checking your credit rating yourself over the internet before you apply for car financing, you will be able to see whether you are in good stead or not and this will put you in a much better position when it comes to discussing the rate with the financing company.
#2 – Take advantage of 0% offers
Often, when you purchase a brand new car, there will be a number of financing options that are offered to you by the dealer. These are often extremely good offers and they are offers that you should take advantage of. In fact, a lot of the time, there will be offers that go as low as 0% finance on some models, so these are definitely worth considering as it really lowers your interest costs.
It should be noted that more often than not, these offers will require a pretty hefty deposit in order to secure the deal. This means that you will need to have at least some cash available to take advantage of these deals.
#3 – Take into account deposits and final payments
The monthly payment rates can often be very attractive when it comes to car financing, but you need to remember that this often isn’t the full story. Although a car financing company might explain to you that you only have to pay a low payment every month, they might ask for a large deposit and/or final payment fee. This is often one of those things that is kept relatively quiet by companies so you need to make sure that you know what you’re getting yourself into. The final payment and deposit can often really increase your costs by a huge amount.
Again, so long as you are aware that this is the case and you check out the paperwork in detail, you will be able to avoid those shocking, unwanted payment reminders.
#4 – Shop around
Making sure to see what offers are available from a number of car finance companies is always something you should do. Interest rates, monthly repayments and final payments/deposits will always vary from company to company to make sure you check out your options thoroughly.
Shopping around for car finance is easier than ever these days as much of it can be done online. There are so many comparison websites that you can use to find the best deals but it should be noted that you should also check a few offline deals out if possible too.
When shopping around, you should also check what used cars are on offer through financing options too, as these will almost always be cheaper than a brand new car.
#5 – Haggle
The oldest trick in the book; haggling. This is a technique that has been used for generations and the good news is that it still works today. Yes, these are now price comparison websites and more dealers than ever, but haggling is likely to be one of the most effective options. If you think about it, if you are sat down with a car deal discussing finance options, they want your business; it’s plain and simple. This puts you (the customer) in a very advantageous position.
While it is true that you aren’t going to work magic by haggling, you are likely to see at least a small reduction in price at least. Start off at your ideal price point and work up from there as you haggle with the dealer/finance company. We think you will be very surprised at how effective basically “asking” for a better price is.
Author Profile: Roger is a car enthusiast and regularly writes helpful blog posts around the subject of car financing/insurance.
Do you have any other tips to get better car financing rates? Perhaps you have a good story of a low rate you negotiated in the past.