In terms of the current generation, it seems as though purchasing a vehicle through a finance agreement is the most logical step-forward option for the majority of us. But before you do, it’s important to know the basics of car finance and what it actually involves. So, here’s some of the most important basics you need to know about car finance before you make the purchase!
Shopping for Car Loans
While the sales of new cars are slumping, vehicle manufacturers continue to invent intelligent, new ways to attract potential customers to their showroom floors. Although low monthly payments, zero deposit and zero percent APR financing might sound like fantastic deals, consumers should be able to make fair and honest comparisons.
Before making your way to buy a new car, there are three all-important factors any consumer should know: how much they can afford to spend on a car, the available options when it comes to obtaining a loan and which financing option is the least costly.
It often pays to shop around when it comes to car loans – the most common choices include licensed credit brokers such as Smile Car Finance, local banks and vehicle dealerships too. Allow yourself to negotiate from a much stronger position with car dealerships by finding a lender that provides pre-qualification or pre-approval process – this will make the process of finding the best loan, much easier and less stressful.
Car Financing Terms
There are many terms used when talking about car finance, and sometimes they can be a little confusing and of course, quite off-putting – finding the best finance deal can seem too good to be true when there’s a huge array of complex terms used that you can’t easily understand. But actually, it’s really not as complicated as you think.
Annual Percentage Rate – One of the most talked about terms of any car finance agreement, otherwise known as APR. Albeit, if you’re a fairly new to financing and you hear the term “APR” on an advertisement, or when you visit a showroom to buy your car, this term can be quite confusing and you’d have to question what it really means. Rest assured that it’s much simpler than you think. The annual percentage rate is used to accurately reflect the total cost of credit.
APR, when properly calculated, allows consumers to make direct comparisons between different offers and is the standardized way of expressing interest rates, and the lower value, the attractive loan.
Finance Charge – the finance charge is the total of all fees and interest charged on a car finance loan, it’s as simple as it sounds.
Total Payments – the total cost of the amount financed as well as the finance charge, so much like the finance charge.