Your Car Finance Guide: Everything You Need To Know About Financing A Car
How dealer vehicle finance works Pressure
When you purchase a new car, you will have the option to finance your car through the dealer. This is a quick and convenient process that can usually be completed on the same day. If you take this option, you will borrow the money for the car, and pay it back with accrued interest, along with any other fees and charges. The loan is secured against your car, which usually will mean a lower interest rate, but your car is up as collateral if you default.
You can finance your car personally, or through your business. Personal finance options are usually flexible and simple, while business finance can offer a range of options to suit different business needs.
Guide To Financing Your Car
When you take out dealer finance, there are a lot of factors to consider. Make sure you ask any niggling questions before you proceed – whether from this car finance guide, or to find the best car finance for you. Here are some key factors to consider.
When you finance your car, you will be able to select your loan term. For example, if you finance your Mitsubishi, you can choose from terms between 12 months and 7 years. Shorter terms often have lower interest rates, but longer terms can mean each of your repayments is less.
- Fixed or variable interest rate
If your finance has a fixed interest rate, your loan repayments are fixed and won’t change. This is the most common type of dealer finance. With a variable interest rate, your loan repayments and total interest can change if the interest rate changes.
The interest you will be charged is not the only payment you need to consider. Dealer finance can also have additional fees paid at different points during the loan. An establishment fee is a cost paid to establish the loan, while a balloon payment (or residual payment) is a lump sum paid at the end of the loan. Some dealers may also charge an ongoing monthly fee for administration of a loan.Ask for the comparison rate to understand the impact of fees and charges. The comparison rate is a single rate for the cost of the loan that includes all fees and charges. When looking at different comparison rates, make sure they apply to the same loan amount and term – otherwise you’ll be comparing apples to oranges. You can also use our finance calculator to get a full picture of how much a loan might cost you.
- Repayment frequency and early repayment fees
Repayment frequency determines how often you’ll need to make repayments. This can be fixed, or some providers such as Mitsubishi will let you choose the most convenient repayment frequency for you. Some finance options may allow you to pay down your loan at a faster rate to reduce interest, while others may charge early repayment fees – so it’s worth checking what the options are.
Have more questions about car finance? Ask one of our financing experts and let us help you find the answers you need.