There are lots of ways that we can consider paying or a car and a car loan is just one of them. It is a popular method and there are advantages to paying this way as well as disadvantages. Some people feel that it is good because it will mean that their car will be cheaper as a result. But is this true?
How can a car loan make a car cheaper?
When you go to a dealer and look at cars, they will often offer you a discount if you take out car finance through them. This means that it will seem that you will save money on the car by doing this. However, this might not always be the case. You will need to do some calculations to find out. For example, you will need to find out how much the car loan will cost you and then compare that with the amount of money they have offered off the car. They might reduce the asking price by £500 and the loan might cost £300 and you will have saved £200. However, they might knock off £500 but the loan will cost you £700 and you will actually be paying out more, even though your car will still be cheaper. Therefore, it will be really important to get all of the figures together so that you can calculate it all. Sites such as Omacl.co.uk can help with this.
You also need to be careful because you may find that car will be cheaper form another dealer. Not that specific car, as only one dealer can sell that car, but a similar car might be cheaper elsewhere. It is good to look around at different dealers as you may find that some are just cheaper than others anyway. But if you do use their finance, then that might eb dearer. This means that you need to calculate the whole cost – that of the car and the finance added together so that you can calculate the true cost of the car.
You may even find that there are dealers that will offer interest free credit. This means that you will be able to borrow the money to pay for the car without paying any interest on the loan. This may not be as good as it looks though. Firstly, you may find that there are admin fees that you have to pay, perhaps to set up the loan. Then you may find that the cars are dearer because they have the finance fees incorporated into their prices. You may even find that it is the charges on the loans that are higher and that if you miss a repayment you will have a lot of extra money to pay. It is therefore wise to look into things really carefully.
Will it make my car cheaper?
Whether it will make your car purchase cheaper will depend on the dealer, the car and the loan. You might find that if you take a car loan from a different lender or use a personal loan instead it will be cheaper than accepting the lowered price form the dealer with their finance plan. It can all be rather complex, but it is well worth working it all out to make sure that you really are getting a good deal. The important thing to do is to find out exactly how much you will repay using the loan. If you do that for every deal you find then you will know which will be the most expensive.
Therefore, once you have chosen the car you want, look around to see if there are any other cars that are similar available and compare the prices. Then look at the finance deals offered by the dealers as well as other lenders and see whether these are good. Calculate how much you will pay in total for the various cars if you use the different finance deals and you will then be able to see which will be the cheapest. It is very wise to find out whether there are any additional charges on the finance deals and also what you will get charged if you miss repayments. This could be quite different between lenders and so it is really important to find this out.
It is likely that if you borrow money to buy a car it will be more expensive than if you buy that car outright with your own money. However, there may be a few exceptions to this and so it is well worth doing the calculations in order to find out. You do need to make sure that there are not comparable cars for sale elsewhere that might cheaper as well. Of course, with second hand cars it can be difficult to compare then exactly, but you should be able to make a fairly good comparison to make sure that you are not paying more than necessary.