If you are looking to replace your car in the near future you might need to think about how you are going to finance the change. While I would like to say I have saved for every car we have owned that wouldn’t be the truth. I have purchased cars with loans and I have tried car finance and bank loans. The best option is to save but this isn’t always possible, but getting the best deal for your circumstance is important.
Car finance is normally through the garage that you are buying the car from, if you have a car this is the deposit, sometimes you might need to pay more, it depends on the value of the car.
Often finance is through a garage but it is still going to mark your credit file and if you know your score isn’t good then another negative mark against your name isn’t going to help your future credit.
The interest rate offered will depend on a number of different factors including the garage themselves, but if they are offering a 0% deal then you seriously can’t beat it. However, it is important that you spend time looking at the price and the monthly payments and work out if it will fit into your budget now and in the future.
The disadvantages are, if you have bought through a garage, sometimes they will sell you extra’s and whilst they are good value you need to ensure that other options are not cheaper and then forgo the extra. One extra that is good to consider is the gap insurance, whilst no one wants an accident, but if your car is in an accident the difference between what the insurance company gives you and the amount left on your finance will get paid off.
It is sometimes easier to get a bank loan rather than opting for the finance through the garage, you can shop around and often find a great deal. Remember that any application you start is going to appear on your credit file and it will reduce the amount of credit you can get in the future.
It is important that when you go and pay for your car you make sure the transaction is free, you don’t want to pay the bank or the garage for accepting your money. You have a couple of options, you don’t want to take large amounts of cash around with you; it is not safe. However, you can pay with your debit card, the garage might have to ring to get approval and you might need to answer some security questions. It is a great idea to know your direct debt amounts to the penny and any other payment on your account, but the card processing company are just checking you are who you say you are. The last option is a bank transfer that you do yourself online, often called a faster payment.
The disadvantages to getting a bank loan is the time it can take the money to come through. However, if you are saving money then, you should consider this important option.
If you have saving then it is possible, as long as you have money left for emergencies that you should consider using savings rather than taking out a loan. With interest rates so low on savings and higher on loans then it makes more sense, but only if you have enough to cover any emergency.
Therefore, while both car finance and bank loans each can have an appeal, it is important to ensure you get the best deal for you and your circumstances.