How not to get ripped off when you finance your next car
Don't let the savings from a good car purchase disappear in higher financing rates
Many Aussies strike a good deal when purchasing a new car, only to lose much of that cost saving in unnecessarily higher leasing costs.
But if you put some of your research time into thinking about financing, then the good car price benefit can last for years.
Understand how financing works
Before signing, it's important to understand the four key components that make up financing.
- Interest rate as shown on contract
- Term of the loan (any option for an automatic extension?)
- Final or balloon payment at end of loan (if applicable)
- Commissions and administrative fees that are added into the final overall cost
Review the repayment cost rather than the interest rate
How do you know if a financing offer is competitive?
Think like a finance broker and ask about the repayment cost. Don't be sidetracked by the seemingly low interest rate.
A car buyer is just like a home buyer and needs to look at the monthly loan repayment amount rather than the advertised interest rate. The actual repayment amount will allow you to see the total cost which can include extra financing costs laid over the rate quoted by the financier.
Commissions, administrative costs and ongoing loan management fees are often included in finance contracts, but be sure to get advice from a broker or at least obtain another quote to ensure that these extra elements are not excessively priced.
Make sure you can afford the loan
Car or work vehicle leasing rates for a business person with a clean finance record are still very competitive.
Even people with impaired credit histories or limited financials can secure vehicle financing in many cases.
As with any extra financing commitment, make sure that it can fit comfortably into the household or business budget.
In preparing any advice in this article, Omniwealth has not taken into account any particular persons' objectives, financial situation or needs. You should, before acting on this information, consider the appropriateness of this information having regard to your personal objectives, financial situation or needs. We recommend investors obtain financial advice specific to their situation before making any financial, investment or insurance decision.
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