Should you wish to borrow money to buy a car, and of course you’re lucky enough to qualify for finance, there are certainly some pretty good deals about. We are slightly biased of course because we have usually found that as well as having more flexible options to offer for customers looking to fund the car purchase car dealers certainly have much more competitive interest rates.
In a straight competition between high street straight forward personal loans and dealer finance, it would probably be a close call, certainly for buyers with blue chip credit ratings. However weighing up the options with regards to the different ways of funding cars dealer finance wins hands down.
PCP’s (personal contract plans) with different deposit options and low APR’s are designed to protect the customer from the negative equity trap but also tailored to fit the car buyer’s monthly budget.
As I have said I’m probably biased but when I look back to the days when this kind of finance came across the water from America it was a product viewed with suspicion by customers and often miss-sold by car sales people. Some sales execs viewed the exceptionally low monthly payments as an excuse to conveniently forget to tell the customer that there was a balloon payment which needed to be settled at the end!
A lot more thought goes into the packaging of PCP’s today, to such an extent that they have overtaken more traditional borrowing solutions hands down. What’s more, from a dealer point of view, they are a lot easier to track. The dealer can make timely contact at the point when a customer is likely to be in parity or equity, and therefore at the optimum time for changing their car.
More thought goes into setting the future value of cars and, as far more data is now available. It is not very often that a customer feels the need to just give the car back at the end of the contract and walk away and the dealer would certainly view this as a missed opportunity when it does happen.
So with exceptionally low rates on offer (do your research because of course this will vary from dealer to dealer) and packages from as little as one payment up front as a deposit, many buyers are getting cash back on their existing car and using that cash to fund or partly fund the loan on the new car. At the same time they get the protection of a risk free investment and a long manufacturer’s warranty. That’s not to mention the increasingly popular service plans which are being attached to finance plans and which really enable customers to budget successfully for the period of the loan.