Everything You Need To Know About Buying a Car on Finance
There are several different ways that you can finance your car, and there are a number of pros and cons about each of them. Choosing the right type for you is very important so take your time and use this helpful guide to make the most informed decision possible.
Whatever you choose to do, remember you should make sure you have enough savings left over for an emergency after you have paid for your car. If you don’t have enough savings to buy the car outright, you could use them to give you the biggest deposit possible:
Pros – Convenient, fast, sometimes competitive
High pressure, usually not competitive; be prepared for a big sales push on add-ons; loans are often front-loaded (payments are made up of more interest in the beginning of the loan than toward the end — that’s bad if you think you may be paying the loan off early.)
Cons – Some dealerships also offer car insurance with the car you are buying but it is not always the best deal. Take at look at what they have to offer but also shop around at sites such as Budget Direct to find the best deal to suit you.
Bank or credit union
Pros – These can offer very competitive rates, personal service, no sales pitch for add-ons and will often be able tell you if you’re paying too much for a car. They can also provide free life insurance or disability insurance with loans and their loans are usually simple interest loans (interest spread evenly throughout the term of the loan)
Cons – Bank or credit union deals are not always as convenient as dealership financing. If you work during the day, bank and credit unions can’t set it up your finance at night or on the weekend so you may have to take time out of work.
Online financial institution
Pros – This choice usually offers the best competitive rates and is a quick and easy solution to your car finance needs.
Cons – This is not a personal service and you will often find yourself dealing with emails rather than face-to-face help. There are also some scams to watch out for so try to have someone with you who knows what to look out for.
Home equity loan
Pros – You can deduct some of the interest from your taxes which can be a big help if you’re short on funds. Home equity loans also offer very competitive rates
Cons – You’re tying your car to your home which does make this option quite risky.
Family member or friend
Pros – With this option, you know you are going to get a personal service that is easy, sometimes flexible and usually competitive rates
Cons – Choosing a friend or family member to finance your car could jeopardize the relationship if something goes wrong. Think very carefully about this option before going down this road or you could end up losing a friend as well as your car.