Tips for negotiating a car finance deal

Finding and buying the right car is only half of the equation. The other half is figuring out how to pay for it – and this part, about negotiating a car finance deal, can be just as daunting. Like anything else, there’s a process you should follow when putting pen to paper on your next contract. So don’t dive into a finance deal without knowing these tips first.

1. Find out your credit history and creditworthiness

Before applying for any type of car finance, you should check your credit record (and know what it says) and figure out where you stand with lenders, as this will affect the deals on offer to you and the interest rates. Generally speaking, if your credit rating is good, you’re more likely to be offered attractive finance rates, and vice versa.

2. Appraise the car’s value

You can haggle with sellers over price, but most car dealerships won’t allow their staff to negotiate on finance rates – which means it’s up to you to make sure you qualify for the best deal. If you have a good idea of what your car is worth, as assessed by Glass’s Guide or other benchmarking services, you can prove your ability to pay and negotiate from a strong position.

3. Get comparison quotes

Work out exactly where you stand by comparing multiple deals from different lenders. This should give you a good idea of what kind of rates and deals are out there while allowing you to establish which lenders will accept your application. You can do this by using an online comparison site such as Driva Perth car loans to get your best rate options.

4. Find the right car finance deal for your needs

Once you’re sure about your creditworthiness and how much money you can borrow, it’s time to choose the right type of finance deal. The three main types are hire purchase, secured loan and unsecured loan. Hire purchase is often called a “HP” or “lease option” deal, where you pay weekly or monthly instalments to the finance company until the end of the contract when you can either buy the car outright or hand it back. This is usually your cheapest option but also carries higher charges if you want to end the arrangement early. Secured loans are where you borrow a sum of money that’s secured against the car itself, so if you don’t pay back your instalments the lender can take your vehicle. These deals tend to be best for those who need large sums of money or low rates. Unsecured car finance is just like an unsecured loan for your home, where you pay interest only and have to repay the full amount over a fixed term. This type of finance is risky for lenders so they usually charge higher rates and allow you to borrow less money.

5. Work out which deals suit your budget

Car dealerships like to push drivers into hire purchase deals because that’s where they make the most profit. But, as outlined above, it may not always be the best option for you – especially if you’re going to struggle with the monthly instalments. Always focus on what you can afford and how much you can really get for your money.

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