Getting the right finance deal is as important as getting the right car, but while most people will search long and hard for their dream motor, many will not invest anywhere near the same amount of time and effort into finding the cheapest car finance; an approach that could cost them dear!
Recent figures suggest that choosing the wrong car finance deal could add as much as £1,100 to the cost of buying a new or used car. In many cases that sum will outweigh any discount given on the purchase price, and certainly put the buyer in a worse position than if they had bought the car at the original asking price for cash!
Almost quarter of a million cars will be bought in the UK through car dealers on finance in March 2008 alone; but just by doing a little research many of those buyers could save a significant amount of money. In short, making sure you get the best deal on car finance could save you a lot more than any discount you may win from a salesman.
There are various ways to finance the purchase of a new vehicle, but the most popular usually involves hire purchase. By this method the purchaser agrees to buy the car from the dealer and pay back the price of the car over a fixed period.
A deposit is usually paid, although many dealers will take a part-exchange vehicle in lieu of deposit, even if the car offered for exchange is an MOT failure or in poor condition.
Car finance is also available via a bank loan, and many experts will tell you this is the cheapest way of financing a vehicle purchase for those who need to borrow. That is generally true, but in these uncertain financial times that option is now almost exclusively available to those with an excellent credit record, primarily because banks and building societies have significantly tightened their lending criteria and are turning down more loans than in previous years as a result.
So, for those in possession of a moderate to bad credit score that option may well be unavailable.
Slightly more expensive than bank loans, but certainly easier for those with less than perfect credit scores to obtain, is car finance direct from the motor dealer. It is this form of financing a vehicle purchase that experts say is most expensive; but unless you are in the lucky position of being able to pick and choose it is probably the most realistic option open to the majority of car buyers with less than exemplary credit records. .
Matthew Pressman is a freelance writer and frequent flyer. When not travelling, he enjoys golf and fishing.