Typical New Car Finance Options
Most of us at some point have overstretched ourselves, whether it is by spending a bit too much on the monthly shopping or splashing thousands of pounds in savings on a lavish holiday. It is also possible to overdo it when it comes to buying a new car, as there is always the temptation to get wrapped up in a vehicle which you can’t really afford. Taking a pragmatic approach to new car finance may be one of the best ways of sticking within your budget and making sure you don’t buy something which you can’t really afford.
It is easy to be tempted by more expensive vehicles – if you can’t really afford them, the level of new car finance that you end up having to take out may dominate your budget from one month to the next and rule your life.
It may be beneficial to write down an exact budget in relation to how much you may afford on a loan each month, plus work out how much of a deposit you are capable of getting together, as these two factors combined may define how much you spend.
Then you may want to turn to a specialist motoring website which may help you to compare different makes and models and prices, and which may also be able to compare loan products and rates for you.
Something else which may be worth doing is considering carefully how much the car you are after costs to run. The purchase price is one thing, but vehicles have their own set of everyday costs, from filling the petrol tank to regular servicing and the costs of replacing the tires.
It may be a good idea to even phone a few garages and get a quote from some of them for how much it may cost to service the vehicle you are thinking of buying. This may be a good way of getting a true picture of the budget you need to run it.
When the time comes to buy the vehicle you may typically get hire purchase offers from dealerships. Essentially this is a seller’s own form of finance, normally meaning you put down a deposit and then spread the cost of the rest over regular installments. In many cases you may pay a considerable amount of interest which may be higher if you spread the payments over a particularly long period.
However, some dealerships are prepared to offer zero per cent interest, particularly if you put down a sizable deposit.
A second common method of arranging new car finance is to set up your own personal loan with an independent company such as a loan specialist or bank. Again a specialist motoring website may be able to compare deals for you and give you an idea of the interest and repayment rates.
You may be able to go straight to a dealership with your approval and use your pre-existing buying power to negotiate. If the dealer knows that you may stump up all of the money straight away and don’t need to pay back in installments they may be more inclined to drop the price of a new vehicle.
Whatever you decide, while a new car finance deal is the main way in which people may afford to buy a brand new vehicle, that does not mean they are to be taken lightly. A considerable debt needs careful budgeting, and you may want to do a considerable amount of your own research before you take the plunge.
Louis Rix is a Director of NetCars, one of the UK’s leading motoring websites. First established in January 2000, its mission is to become the number one site for used car searches. NetCars provide New Car Finance.
Car Financing FAQ:
Question: How does a new hire go about getting car financing?
I just graduated from university with a BS degree and will begin work soon. I need to buy a car and need financing. The conundrum is that I am planning to drive myself to the new city I will be in, which means I will be signing my lease after I buy the car.
Am I technically employed for the purpose of a loan application? Is there any special way for new hires to go about loan applications?
Answer: No just apply like normal & ask if they have a first time car buyer discount.
Question: Where can I download a private party car financing contract?
We are purchasing a car from a family member who is allowing us to do payments on it until tax time when we will pay the remaining balance in full. For the protection of both parties we would like to have a contract stating our “financing” terms. I know I can just write one up myself, but there has to be someplace online that has like a PDF format or something I can just fill in.
Answer: I am not sure what type you are looking for (term etc) or how much you are willing to spend, but if you type legal documents into the internet search bar then many options of websites will come up, you can click on any of those and you’ll be able to find your sub topic needed- purchase fill in print and get notarized.
Question: Just bought new car, financed through dealer, can I change to bank financing?
I live in MA and I just bought a new car about a week ago. I think I can get better financing through my credit union. Can I switch financing without a penalty or how does that work?
Answer: Read your contract, it depends on the terms of the loan…but normally yes you can refinance if you have good credit and the car is worth the amount you got loaned.
Question: Do I need full coverage insurance if I get in-house car financing?
I have no credit and I think in-house car financing is the only way I can get a loan for a cheap car (I’m looking for something up to $3000).
Is full coverage car insurance mandatory if I get in-house car financing?
Answer: Any time you finance a vehicle full coverage is required to protect the interest of the lender.
Question: Which bank to go to for new car financing?
Now that bank of america is loosing its worth because of credit card and auto load default, is it okay to get a new car financing from Bank of America.
Answer: Yes, it’s fine to go to Bank of America. I would suggest if you have great credit, the best interest rates you’re going to get are through the dealer. Many of the car companies have rates under 4%, including some 0% interest rates for short loan periods.
Another good avenue is to go through a credit union. Pentagon Federal has new auto loans at about 4.25% right now. If you qualify for a credit union through your job or through some other means, definitely check that route out.
Question: What is the average used car financing percentage?
I am just trying to calculate how much it would cost me to finance a car. Down payment will be anywhere from 10% to 20% of the car price. I have good, not excellent credit.
Answer: There are a number of factors that will affect the rate you get. Credit, miles on the car, year model of the car, term, etc. I would say just as a generic answer without knowing any details but what you have given that anything from 8.5% or lower would be ok. If you go 72 months term it might be slightly higher.
Question: For tax purpose, can I amortize the cost of the financing or leasing car for my business?
I plan to finance or lease a car for my business. My friend told me that: For tax purpose, I cannot amortize the cost for a leasing car. But I can amortize the cost for a financing car. Is that correct?
Answer: There is no such thing as amortizing in Canada. Leasing or financing interest can both be deducted as expenses. You also can claim Capital Cost Allowance on the cost of the car.
Question: Need Help Finding Online Car Financing Service.
I’m looking for a reputable online Car Financing Company that will cater to me so I can avoid the dealer “tricks” and the insulting low-ball offer that my bank just presented me with. I am a first time car buyer and only 22 years old so I understand that some companies will just not want to deal with me.
Answer: Financing is something you need to take care of locally and in person. Visit a Credit Union of your current bank isn’t offering you a decent rate. But you are correct in one thing, you need to bring in a pre-approved loan from a 3rd party lender in order to avoid the financing shell game the dealers play.
But in this economic climate don’t be put off if all the offers you get are slightly unfavorable. You are a young first time buyer and your credit history probably isn’t what it needs to be to get the best rates. Money is tight, I’d be happy with any reasonable approval from a traditional lender.