Don’t be seduced by the monthly payment

With car dealers striving to establish and maintain profit centres, car finance is the latest buzz phrase in the business. The thinking is that if new car sales are down lets maximise every income stream possible with the customers who are in he market for a new vehicle. Car finance is at the centre of everything that dealers do, they are taking advantage of the fact that savings interest rates are not worth mentioning and they know that they can easily beat high street lending rates on unsecured loans and if sold correctly buyers can negotiate themselves a good deal both on the car and the finance package. However watch out for the sharp salesperson that attempts to get a customer to forget about the price of the car, the value of the trade-in or the APR and just wants to concentrate on the monthly payment. These are things that buyers should be very mindful of. Just because they may be happy to pay a monthly figure of £300 (and it may indeed seem very attractive) if the salesperson is not discounting the car or giving enough for their current car then why should they accept paying the £300 if they can get a better deal and pay £200 per month?

Customers should, of course, have their wits about them and keep in mind the following;

Ask how much will the balance to finance will be after deposits and part exchange value.

What is the interest rate?

What is the total amount payable, e.g. £10,000 borrowed at 5% over 3 yrs = £319 meaning total payable = £11,484 so the £10,000 will cost £41 per month in interest! It is important that you know the facts before signing the papers.

What are the upfront fees and the final payment fees (they can often be a few hundred pounds in total)?

Make sure and ask about the other products such as credit insurance and GAP many dealers will offer these products as a pack and give the illusion that they are included in which case there can be a better deal done on the car if they can afford to include the extras.

Ask what the early termination of the agreement will cost.

These are all points which a good dealer will happily let any customer know, but if customers don’t ask then invariably they don’t get.

So if a salesperson is laser focussed on what you are paying as a monthly figure, make sure that you start from what’s best for you i.e., best retail price on the car, best trade in value and best interest rate on your balance as you could end up saving thousands just by asking simple questions and by comparing them elsewhere.

Remember every extra finance based product offered by a dealer can be bought elsewhere so whilst some products may be cheaper through the dealer, by shopping around you may save money on others, and at the very least you can gain some leverage with the dealer and ask if he wants to match what has been quoted.