Car Loans Explained

It is fair to say that for many people a car is a necessity and no longer a luxury. The need to get to work, to courier the children to school or simply be mobile due to poor public transport services in your area is a more than reasonable excuse to own a car. However, as cars are an expensive commodity many people will require a loan and a substantial one at that if they are planning on buying new, in order to purchase a car that is of the quality and condition that they desire. Car loans are available from a number of sources, though the most likely choice that you shall make is using the car dealership in question or a bank.

Taking financial support from a bank has proven to be the most popular choice for car buyers. You have two options for financing the purchase of your car. The first is with a personal loan and the second being a variation of a personal loan which is tailored specifically for the purpose of purchasing a car. They are both very similar in concept but by choosing the car loan it is possible that the lender will recommend to you a car-related incentive on the loan. This could range from special discounts on car accessories at associate garages and stores, free car insurance or roadside assistance cover.

Whereas many car dealerships will entice the buyer with offers of interest-free loans on their motor vehicles, usually on brand new cars but also models that are being discontinued. This is usually branded as a 0% finance deal and these packages can prove to be a cost effective way of securing a cheap car loan. This is on the proviso that this offer is available on the make and model you want, how much of a deposit is required to initiate the deal, and that the terms and conditions of the repayment schedule is to your satisfaction.

However, you are not necessarily going to get a 0% finance deal as these are few and far between. When you take out a loan with a car dealership, it is in fact the Finance and Insurance department, not the sales division, which dictates the rate of interest that you will be paying. The business manager will be given your credit information by the sales team and he will then send it to the lender(s) that the dealership use. When they have calculated their quotes the business manager will collate those figures and then take the lowest approved interest rate. The reason for this is so that a mark up can be implemented on the initial quote to accommodate the dealership’s cut. Therefore, to put it simply, the marked-up amount is the dealership's profit on the financing they are offering for the purchase of your chosen model.

Therefore, if you want to get the best deal possible you will have to enter the negotiation process regardless of whether you have secured your loan from the bank or the dealership. Our experts recommend doing as much of your own research as possible and to have a minimum of five quotes on the model you wish to purchase. Newspapers, car magazines, the Internet and visiting your local showrooms to get the current price list are all good areas to exploit. This will already show the salesman that you are aware of their competitor’s prices and that you will not hesitate in pursuing other means to get yourself the best deal possible.

Remember, our experts advise that you calculate your own monthly payments in accordance with what you can afford. Do not make the mistake of negotiating the amount you will pay each month instead of the full price of the car as this could prove to cost you more than originally expected. Always negotiate the price of the car first and only then should you decide how you are going to comply with the repayment period. The Loans Network also recommends that you compare our deals with those of our partners Home-Loans.Net